Central Bank of Nigeria Defies League of Global Interest Rate Cutters
The Central Bank of Nigeria (CBN) recently made a surprising move by raising the Monetary Policy Rate (MPR) by 50 basis points to 27.25 percent from 26.75 percent, refusing to join the US Federal Reserve, South Africa Reserve Bank and other central banks globally which recently cut their interest rates.
Analysts had expected the Central Bank of Nigeria (CBN) to cut its benchmark interest rate due to slowing inflation and global trends.
Olayemi Cardoso, CBN governor, stated that the MPC remained focused on achieving price stability by reining in inflation.
Here are the Central Banks which have cut their benchmark interest rates globally;
Swiss National Bank
The Swiss National Bank was the first Western bank to cut interest rates in March 2024. The Bank has cut rates three times since then, bringing the benchmark interest rate to 1.0 percent.
Domestically, Swiss inflation remains subdued, with the latest headline print pointing to a 1.1 percent annual increase in August.
Thomas Jordan, SNB chair stated, in an interview with CNBC, that “further rate cuts may be necessary to stabilise inflation within the range of price stability in the next three months.”
“In December, the new inflation forecast will tell us exactly in what direction monetary policy should then be adjusted,” he said.
US Federal Reserve
For the first time in four years, the US Fed opted for a larger-than-expected interest rate cut by 50 basis points. This brought the benchmark interest rate to 4.75 percent – 5 percent.
Jerome Powell, Federal Reserve Chair said the aggressive action was intended to ensure that high borrowing costs, put in place to fight inflation, would not end up hurting the US economy.
“The labour market is in a strong place – we want to keep it there. That’s what we’re doing,” he said.
According to the International Monetary Fund, the Fed’s rate cuts will boost Eurobond issuance in emerging markets and ease global interest rate conditions.
South African Reserve Bank
South Africa cut their benchmark interest rates for the first time since 2020 amid a slowing inflation rate.
The South African Reserve Bank (SARB) lowered its main lending rate to 8 percent from 8.25 percent, a day after data showed headline inflation fell just below 4.5 percent, below the central bank’s target range.
Lesetja Kganyago, SARB Governor stated that the Bank was being cautious by lowering the rate by 25 basis points instead of 50 basis points.
“In the analysis, we found 25 to be a prudent stance to take. You’ve got to be cautious. Adventurism is not part of our monetary policy toolkit,” he stated.
European Central Bank
The European Central Bank cut its interest rates last week for the second time in three months, easing its initially aggressive monetary policy stance in the eurozone.
The Bank, which sets rates for the 20 countries that use the euro currency, lowered the deposit rate to 3.5 percent from 3.75 percent.
However, Central Bankers are still cautious of stubborn inflation in some sectors. This made it the second rate cut since 2019, the first being in June 2024.
Christine Lagarde, Central Bank President stated that the Bank was “not pre-committing to a particular rate path,” as central banks tentatively approach rate cutting.
In the eurozone, inflation averaged 2.2 percent in the year through August, down from 2.6 percent the previous month, according to the region’s statistics agency.
Mexico Central Bank
The Bank of Mexico lowered its benchmark interest rate by 25 basis points to 10.50 percent yesterday, the second straight cut as price pressures have been easing in Latin America’s number 2 economy.
Mexico’s annual headline inflation slowed to 4.66 percent in the first half of September, official data showed, its fourth consecutive decline. Core inflation moderated to 3.95 percent, its lowest level since early 2021. In August, Banxico also cut its benchmark interest rate to 10.75 percent.
