Inflation: MPC may cut interest rate again today

Analysts are projecting that the Monetary Policy Committee of the Central Bank of Nigeria will maintain its dovish stance, with a rate cut of between 25 and 100 basis points expected as its November meeting concludes on Tuesday (today).

The MPC had cut the rate for the first time in years at the September meeting, shaving 50 basis points off the benchmark rate to 27 per cent. Other key decisions taken at that meeting were to adjust the Standing Facilities corridor around the MPR to +250/-250 basis points; adjust the Cash Reserve Ratio for Commercial Banks to 45 per cent while retaining that of Merchant Banks at 16.00 per cent; introduce a 75 per cent CRR on non-TSA public sector deposits; and keep the Liquidity Ratio unchanged at 30.00 per cent.

Under its current governor, Olayemi Cardoso, the CBN had maintained a hawkish stance as it sought to get a handle on inflation that hit record levels in 2024.

In a macroeconomic update made available on Monday, the Manager, Market Analyst, FXTM, Lukman Otunuga, projected a rate cut due to moderating inflation.

Otunuga, who conducted a global review of the week’s economic drivers, said, “In Nigeria, the CBN could cut rates by as much as 100 basis points on Tuesday as inflationary pressures cool. Annual inflation fell to 16.05 per cent in October 2025, its softest level since March 2022. Persistent signs of easing price pressures have provided much breathing room for the CBN to cut rates in an effort to stimulate growth.

“Speaking of growth, Nigeria’s Q3 GDP will be published on 28 November. More signs of recovering growth may boost sentiment and encourage the CBN to pursue its expansionary monetary policy.”

Afrinvest Research also highlighted improving inflation dynamics and a favourable macro backdrop.

“Looking ahead, we expect the disinflation trend to persist through November,” the firm said. “We forecast headline inflation to rise mildly to 1.1 per cent m/m in November, while the favourable base effect should drive annual inflation lower to 15.8 per cent.”

Afrinvest added, “We expect the positive inflation dynamics, relative FX stability, and firm GDP growth expectation (Afrinvest projection for Q3: 3.8–4.3 per cent y/y) to support a dovish call at the MPC meeting scheduled for 24–25 November. Specifically, we anticipate a modest 25–50bps rate cut, which should sustain the bond rally but with limited effect on equities.”

Cowry Assets offered an even more dovish outlook.

“The Monetary Policy Committee meets next week at a pivotal moment, as steadily easing inflation since September has strengthened market expectations that another round of monetary easing is imminent,” the firm said.

According to Cowry Assets, “investors and businesses alike anticipate that the MPC may deliver an additional 100 to 200 basis-point cut to the Monetary Policy Rate, extending its dovish stance in a bid to stimulate economic activity.”

Still, Cowry Assets warned that structural weaknesses persist.

“Beneath this improving inflation outlook, the real economy continues to struggle with elevated operating costs, fragile consumer demand, and multiple structural pressures that have kept growth momentum muted.”

Cordros Capital also pointed to room for deeper easing.

“Recent developments suggest scope for a slightly deeper round of easing than the 50 bps cut delivered in September,” analysts said.

Cordros added, “Given a more favourable macroeconomic backdrop, we expect the MPC to adopt a firmer easing bias and lower the Monetary Policy Rate by 100 bps to 26.00 per cent, while keeping other parameters constant.”

The investment firm further stated, “Given these improvements, we believe the MPC is now in a stronger position to extend the easing cycle and could opt for a 100-bps cut in the MPR to support growth while still keeping its inflation goals in focus. This would bring the MPR to 26.00 per cent by year-end. On the other hand, we expect all other policy parameters to be retained, reflecting the Committee’s preference for a measured and orderly recalibration of monetary conditions.”

Meanwhile, on the global scene, Otunuga indicated that equity markets had kicked off on a positive note, with tech leading gains amid rising expectations for a December US rate cut. A string of dovish messages by Fed officials last Friday boosted these odds to 70 per cent, but incoming US data may either reinforce or temper these bets.

Over the weekend, top US diplomats met with Ukrainian and European officials to discuss a Russia-Ukraine peace plan. However, European leaders rejected such plans, with the US and Ukraine promising an “updated and refined framework”.

“Should talks end in a deadlock, this could spark risk aversion across the board. GBPUSD could be set for a week of mayhem due to the pivotal UK Autumn budget on Wednesday, 26 November. With the UK fiscal hole as much as £30bn, tax hikes are expected, potentially leading to more pain for consumers with a drop in disposable income, hitting growth. If this raises bets around lower UK rates, the pound could be in for fresh pain.

“In the United States, incoming US retail sales and PPI may provide more insight into the health of the economy.”