OUR SUBMISSION; ACTION ON CRR APPROPRIATE FOR IMPROVED POLICY WIGGLE ROOM IN THE FUTURE

four months of the year portend some headwinds to growth through potential upside pressure on the already elevated lending rates and crowing out effect on private sector credits and possible transmission to higher domestic prices through financial costs. A concern that monetary policy is gradually near the ceiling on policy tightening

management and price stability. In addition, We have argued consistently in our previous monetary policy coverage that the increases in policy metrics are driving monetary policy to levels where it could become ineffective. In this regard, we consider the action on the CRR appropriate at creating some room for effective policy action in the future. By the way, increasing on petroleum products and backlogs in personnel payments among others which the current revenue profile does not appear to have the capacity to accommodate. It is therefore unclear how the monetary authority intend to manage the attendant risks of continuing rise in credit to the government as it highlighted above.

EXPECTED MARKET REACTION; STABILITY SHOULD FOLLOWTHE INITIAL PRE ANNOUNCEMENT REACTIONS

recent scarcity of petroleum products and attendant higher non official prices of products and sustained elevated costs of funds could keep core inflation high and possibly increase further. It is therefore not unlikely that the upper band of the official

the near term. remain volatile in the interim with little or no reaction to the monetary policy action effect. Post inauguration upside is however possible as the new government unfolds its fiscal plan for the economy in the face of the daunting fiscal sustainability and economic growth challenges.