How the Monetary Policy Committee Increased Rates of 1.5% can affects your money
The Monetary Policy Committee increased rates in a meeting by unanimously voting to raise the MPR (Monetary Policy Rates) by 150bps to 13.00% in its 3rd meeting of the year.
The results of the votes are as follows;
6 members voted for a 150bps, 4 voted for a 100bps hike and 1 voted for a raise of 50bps.
According to the CBN Governor, the rates hike was necessary due to the sharp rise in inflation across both progressive and emerging market economics and the consequential rate hike by the major central edges such as the Us, Fed, Bank of England, European Central Bank and Bank of Canada.
These edges ultimately impact capital flows away from emerging market economics.
Rate increase also has an ambiguous impact on the stock market. it could be a positive one for edges and other financial institutions that can earn more on their loans and assets. this events could also rule to sales of stocks as fixed income securities- bonds and treasury bills by investors which depressed the valuation of companies. Reports have it that though the market was already in profit taking mode, stocks experienced a sharp drop yesterday.
Loans would comparatively have an higher interest becoming more expensive. for persons with a variable rate loan, expect an increase in rates. Fixed income investment becomes higher in interest. New fixed treasury investments in things like treasury bills, commercial papers, bonds and fixed deposits would be at a higher interest rate. The value of existing bonds and treasury bills would however observe a decline and possibly impacting your investment in fixed income/bond mutual funds.
Possibilities of impacting Exchange Rates becomes high however higher rates are known to attract more Dollar supply which should help the exchange rate.
Inflation might not reduce. typically higher interest reduces inflation, however in Nigeria, inflation is pushed by cost and there’s no clear impact of interest rates on it. prices of good and sets are nevertheless high which method inflation is more likely to persist.
Personal savings might in addition not be affected. it is known that edges don’t increase the rates on savings accounts due to the increase in MPR so it’s more likely there would be no increase or impact. additionally edges do not give interest pay into savings account especially if 5 withdrawals are made on such account in a month.
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