CBN raises interest rates to record 26.75% to fight inflation

In a bid to curb rising inflation, the Central Bank of Nigeria (CBN) has raised its benchmark interest rate, the Monetary Policy Rate (MPR), to a record high of 26.75%.

This is an increase of 150 basis points from the previous rate of 24.75%, which marked the third consecutive increase this year.

CBN Governor Olayemi Cardoso announced this after the central bank’s 296th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday.

The decision comes against a backdrop of “historically high inflation rates,” Cardoso said. Current figures show inflation hovering around 33.69% in April 2024. Inflationary pressures are being driven by a combination of factors, including the removal of fuel subsidies and the floating exchange rate of the Nigerian Naira.

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The CBN’s strategy is to make borrowing more expensive, thereby discouraging spending and ultimately reducing demand in the economy. In theory, this should help cool inflation. However, high interest rates can also have negative effects, such as slowing economic growth and making it more expensive for businesses to access loans for investment.

The effectiveness of these aggressive rate hikes remains to be seen. Analysts will be closely monitoring key economic indicators in the coming months to gauge their impact on inflation and economic activity.

The CBN’s decision is likely to be a major talking point in Nigeria, as its citizens grapple with the rising cost of living. The success of the bank’s efforts to combat inflation will be critical to ensuring economic stability and driving long-term growth.

CBN raises interest rates to record 26.75% to fight inflation first appeared on Latest Nigeria News | Headlines from Ripples Nigeria.