September 2022 MPC Decision – MPC Further Hikes Rates to 15.50%

Inflation Rate Continues to Rise Unabatedly


The Monetary Policy Committee unanimously voted to increase the monetary policy rate (MPC) to 15.50% from 14.00%, being the third hawkish move in 2022 by the apex bank.

The MPC had increased the interest rate from 11.50% to 14.00% over its two previous meetings, however, with the inflation rate still spiking above 20%, the CBN further  raised the rate to 15.50% to combat the rising cost of goods and services

The decision to hike was based on the outcome of a poll where ten (10) members supported  a 150 basis points increase. One (1) member voted to raise the MPR by 100 basis points while one (1) member voted to raise the MPR by 50 basis points respectively.

The Committee’s Decision

Consequent to the persistent inflationary pressure, the Committee was left with no other choice but to aggressively tighten. The most recent inflation data (for August 2022) revealed that the general price level(i.e., inflation) increased by 20.52%. Given the primacy of its price stability mandate, the need to rein-in inflationary pressures was necessary. According to the Committee, the previous two hikes reflected in the slowing growth rate of money supply. Therefore, an additional hike would help consolidate the objective of absorbing liquidity in the economy.

Potential Implications for the Financial Markets

We expect yields in the fixed income market to reprice aggressively based on not just the rate hike decision, but also the body language of the Committee. As indicated by the extra lever of raising the Cash Reserve Requirement Ratio (CRR), the Committee is on full throttle to its tightening stance.

Thus far in H2 2022, the equities market is on a 5.13% price decline, a reverse from the 21.31% price gain in H1 2022. The bearish trend in H2 2022 is due to the upward trend of fixed income yields which raised the opportunity costs of holding stocks. In view of the policy rate hike, we expect to see a further dip in prices in the equities market.

What Investors Should be Doing?

As expressed in our mid-year outlook, we believe that shortening duration is the optimal investing decision in a rising interest rate environment. This means that investors should focus more on short-term financial instruments. We note that investors are dynamic with different investment objectives. We classify investors as:

Please follow the link “MPC Further Hikes Rates to 15.50%” to view the whole report.

Thank you.

Share This :


Subscribe & Get More Information

Subscribe to receive email market and product notices, newsletters and press releases.

Copyright © 2010 WSTC Financial Services