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Why MPC retained interest rate at 13.5%

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To encourage commercial lenders to extend credit to the private sector, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained the Monetary Policy Rate also known as benchmark interest rate at 13.5 percent.
Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, addressing the press at the end of a two-day MPC meeting held on Tuesday  in Abuja, explained that the committee unanimously voted to retain the MPR, after the rates were reduced from 14 percent to 13.5 percent in March 2019, the first time the MPR was reduced since July 2016.

“Given the happenings in the external sector and the fact that inflation is moderating, tightening of monetary policy should not be an option at this time, as restriction of the capacity of the DMBs to create money could curtail their credit creation capabilities,” he stated.

He noted that members of the committee were convinced that key macro-economic indicators are trending in the right direction and because of the lag in the effects of policy actions on output.

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The CBN Governor also mentioned that the committee decided to hold the Cash Reserves Ratio at 22.5 percent and retain liquidity ratio at 30 percent.
“The MPC voted to retain the asymmetric corridor at +200 and -500 basis point around the MPR, Retain the CRR at 22.5 percent and retain liquidity ratio at 30 percent.”

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