Standard Chartered Projects CBN’s MPR At 25% By Year-End

Standard Chartered Plc has projected that the Central Bank of Nigeria (CBN) will adopt a cautious monetary easing cycle in 2026, forecasting that the Monetary Policy Rate (MPR) will close the year at 25 per cent, as persistent inflationary pressures continue to constrain the scope for aggressive interest rate cuts.

The forecast, contained in the bank’s latest investment note by Chief Economist for Africa and the Middle East, Razia Khan, represents a more conservative outlook for Nigeria’s monetary policy trajectory, with the lender expecting the apex bank to reduce interest rates by only 150 basis points (bps) next year.

The revised projection also reflects a less optimistic inflation outlook. Standard Chartered increased its average inflation forecast for 2026 to 15.5 per cent, up from its earlier estimate of 12 per cent, citing lingering price pressures that are likely to keep the CBN focused on maintaining restrictive monetary conditions.

According to Khan, the persistence of inflation has significantly narrowed the room available for the central bank to ease monetary policy.

“We now see inflation averaging 15.5 per cent in 2026 compared with 12 per cent previously. We now see scope for 150 basis points of policy easing in 2026, taking the monetary policy rate to 25 per cent at year-end,” she said in the report.

The investment bank also revised its broader inflation outlook, projecting average inflation of 14.7 per cent in the following year, compared with its previous forecast of 13.8 per cent, underscoring expectations that price stability will improve only gradually.

Despite its more cautious stance for 2026, Standard Chartered believes Nigeria could witness a more substantial monetary easing cycle from 2027 onward as inflation moderates and macroeconomic conditions strengthen.

The bank projects that the CBN could slash interest rates by 700 basis points after the January 2027 elections, followed by an additional 350 basis points in 2028, provided inflation continues to decline and broader economic fundamentals remain supportive.

The outlook aligns with the CBN’s recent policy direction, which has emphasised inflation control while seeking to preserve macroeconomic stability and sustain investor confidence.

At the conclusion of its 305th Monetary Policy Committee (MPC) meeting on May 20, the committee left the Monetary Policy Rate unchanged at 26.5 per cent, extending its wait-and-see approach after implementing a 50-basis-point rate cut at its February meeting.

The MPC also retained the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and 16 per cent for merchant banks. In addition, it maintained the Standing Facilities Corridor at +50/-450 basis points around the MPR and kept the 75 per cent CRR on non-Treasury Single Account (TSA) public sector deposits.

Explaining its decision, the committee said maintaining tight monetary conditions was necessary to contain renewed inflationary pressures, following consecutive increases in headline inflation recorded in March and April. It added that holding policy rates steady would provide more time to assess the effectiveness of earlier tightening measures in restoring price stability.

Analysts say the latest forecast from Standard Chartered reinforces expectations that, while inflationary pressures may gradually ease, the CBN is likely to remain cautious in loosening monetary policy until there is stronger evidence of sustained disinflation.

The outlook suggests that interest rates will remain elevated through much of 2026, with a more pronounced easing cycle expected only after inflation shows a durable downward trend.