At the end of a two-day meeting that ended today, the Monetary Policy Committee concluded that the balance of risk is tilted towards the exchange rate, and consequently voted to; raise the Monetary Policy Rate (MPR) to 12 percent from 11 percent narrowed the asymmetric corridor to +200bps/-500bps around the MPR, from +200bps/-700bps Raised the CRR to 22.5 percent from 20 percent lending rate (LR) unchanged at 30 percent.
Primary Concerns at the meeting includes, further decline in global output in 2015, sustained pressure in global financial markets, diminishing domestic output growth, rising inflationary pressures (factors noted to be more structural than monetary), with MPR negative in real terms, thus putting foreign and domestic investments on hold.
Annualized money supply in February below provisional benchmark for 2016, weak credit to the private sector, Deposit Money Banks (DMBs) reluctant to grant credits to the real sector due to high Non Performing Loans (NPLs), uncertainty around fiscal policy, adverse external environment, low electricity, insecurity e.t.c have continued in first quarter of 2016.
Excess liquidity in the banking system contributing to pressure in the forex market, previous effort with CRR cut not transmitted to growth sectors. Out of 12 members only 8 were in attendance.