The MPC as expected made no changes to its policy stance and left parameters unchanged. The markets were not surprised and did not react negatively but responded with very mild volatility. The MPC communiqué and the subsequent Q & A session was a sober and candid reflection on the limitations of monetary policy tools as a panacea for stagflation and macroeconomic structural problems.
The dose and therapy adopted and recommended are unlikely to achieve the desired outcome of increasing output and moderating inflation in the short run. The MPC asked the CBN to focus on stimulating growth whilst being silent on the sensitivity of aggregate savings to interest rates.
The MPC was cautiously optimistic about economic recovery in Q1’21 and believes inflation will decline as output increases later in 2021.
In the slides, Bismarck Rewane carries out an incisive analysis of what was a very important meeting of the MPC as it attempts to resolve the monetary policy dilemma facing Nigeria at this time.