The central bank on Thursday kept its policy rate unchanged, stating that its current policy stance aligns with its inflation outlook and supports economic growth.
The bank’s deputy governor, Michael Atingi-Ego, said the monetary policy committee decided to maintain its key lending rate at 9.5 per cent.
“The MPC considers that the current monetary policy stance will contribute to keeping inflation around its medium term target; supporting economic stability to encourage saving, investment, economic growth, competitiveness and socio-economic transformation,” Mr Atingi-Ego said.
Consumer price inflation has remained contained despite a recent surge in fuel prices, attributed to effective monetary and fiscal policies, diminishing drought-related food price effects and easing global cost pressures, according to the bank’s policy statement.
Annual inflation fell to a 22-month low in September, coming in at 2.7 per cent, while the bank’s preferred inflation measure, the core consumer prices index, fell for the eighth straight month to 2.4 per cent, down from 3.3 per cent in the year to August.
Read: Inflation slows further in September
However, while the bank reiterated that the risks to inflation in the short term were balanced, it adjusted its forecast to show that it now saw the risks over the medium term – typically measured over a 12-month period – as increasingly skewed to the upside. This medium-term outlook was the key factor in the committee’s decision to keep the policy rate on hold, as opposed to easing it, Mr Atingi-Ego said.
The forecast predicts that inflation will range from three to four per cent in Q4 2024 and from four to five per cent in 2025.
Risks of rising consumer prices include currency devaluation due to volatility in international markets; a rise in fuel prices due to supply disruptions caused by the war in Ukraine; and persistent high inflation in developed countries leading to interest rate hikes, ultimately leading to further capital outflows and exchange rate depreciation.
The bank’s forecasts for economic growth remained broadly unchanged, at 6 per cent in 2023/2024 and 6 to 7 per cent in the medium term. Continued recovery in the services and industrial sectors will drive economic growth in the coming months, alongside investment in the oil and gas sector and higher export earnings, it said.
