Emefiele: Expect more rate hikes if inflation trends up

The Governor of the Central Bank of Nigeria, Godwin Emefiele, has issued a stern warning that the Monetary Policy Committee (MPC) will persist in raising benchmark interest rates as long as inflationary pressures persist. Emefiele delivered this message during a recent media briefing at the conclusion of a two-day meeting. He emphasized that Nigeria's current monetary policy strategy aligns with the practices commonly observed in developed countries. Emefiele highlighted the central bank's commitment to maintaining price stability to foster economic growth, despite the challenging inflationary environment. Emefiele explained that the central bank has previously held interest rates steady to support output growth while intensifying efforts to enhance economic performance. However, due to the significant acceleration in Nigeria's inflation rate, which jumped from 3.13 percent in 2020 to 18.6 percent in the latest data release, the MPC made the decision in May to raise rates by 150 basis points. Emefiele stressed that the trajectory of inflation cannot be ignored, necessitating decisive action to curb its impact on the economy. During the MPC's thorough analysis of economic data, members recognized the urgency of addressing the escalating inflation levels. Emefiele acknowledged the concerns raised by some analysts regarding the implications of continued rate hikes, such as heightened borrowing costs and potential constraints on future output. Despite these considerations, the MPC remains steadfast in its resolve to tighten monetary policy as long as inflation poses a threat to economic stability. While Emefiele acknowledged the importance of utilizing development finance tools to support output growth, he underscored the imperative of combatting inflation as a priority. The central bank is exploring various measures to mitigate inflationary pressures, including initiatives to boost agricultural productivity and anticipated improvements in food prices following the harvest season. Emefiele concluded by signaling the MPC's unwavering commitment to further rate hikes if inflation continues its aggressive ascent. He emphasized the necessity of striking a balance between addressing inflationary risks and promoting economic growth through targeted interventions. The central bank's resolute stance reflects its proactive approach to safeguarding Nigeria's economic stability amid persistent inflation challenges.