The International Monetary Fund has cautioned that Nigeria and other emerging economies are jeopardising their financial stability by continually increasing benchmark interest rates.Infomation Guide Nigeria
In a new study titled “Interest Rate Increases and Volatile Markets Signal Rising Financial Stability Risks,” the global lender warned that central banks encountering persistently high inflation had to speed monetary policy tightening to prevent inflationary pressures from becoming entrenched.
The research indicated that financial conditions have tightened as central banks continued to increase interest rates. In light of the high level of global uncertainty, the threats to financial stability had escalated significantly.
Inflation at multi-decade highs, continuous deterioration of economic outlooks in many regions, and persistent geopolitical threats were cited as important challenges facing financial systems.
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The report partly read, “Financial vulnerabilities are elevated for governments, many with mounting debt, as well as nonbank financial institutions such as insurers, pension funds, hedge funds and mutual funds. Rising rates have added to stresses for entities with stretched balance sheets.
At the same time, the ease and speed with which assets can be traded at a given price has deteriorated across some key asset classes due to volatile interest rates and asset prices. This poor market liquidity, together with pre-existing vulnerabilities, could amplify any rapid, disorderly repricing of risk, were it to occur in the coming months.”
The Monetary Policy Committee of the Central Bank of Nigeria increased the benchmark interest rate from 14 to 15.5 percent last month in an effort to curb the increasing inflation rate.
This was a 150-basis-point hike from the rate of 14% approved at the July meeting of the MPC.
Additionally, this was the third time in 2022 that the policy board of the central bank had voted to increase the benchmark interest rate.Jamb Result
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