Monetary Policy Rate (MPR), otherwise known as benchmark interest rates will not be raised when the Monetary Policy Committee (MPC) meets for the first time this year as a result of the first round of inflationary effects from the removal of fuel subsidy, Central Bank Governor Sanusi Lamido Sanusi said last week.
The central bank is due to hold its first interest rate setting meeting for the year next Monday and Tuesday.
“In January, because of the removal of subsidy there’s going to be inflationary pressure. Usually we will not respond to that directly because it’s a first round effect … so we will not raise interest rates in response to inflationary pressure from the rising oil prices,” Sanusi told CBNC Africa television.
Based on the increase in the price of Premium Motor Spirit (PMS), otherwise known as petrol, prices of goods have moved northward, particularly food prices. Incidentally, food accounts for a greater proportion of the Consumer Price Index (CPI) basket.
That means that any increase in the price of food, would easily translate into rise in inflation. And as we talk today, inflation is already 10.5 percent as at November last year, a notch from the single digit zone.
In Spite of that Sanusi said it may be “counterproductive” to raise interest rates in response to a jump in fuel prices that will probably push up inflation.
“We will have to see where the balance of the data points to, but from where I sit it looks like holding for a bit is the best option,” Sanusi told Bloomber recently.
He however made it clear he was not speaking for the central bank’s Monetary Policy Committee, which will meet January 30th to -31st 2012.