The MPR represents the rate at which the central bank makes short-term lending to commercial banks and serves as a signal for the direction it would like interest rates and money supply to go as part of its inflation-targeting mandate.

This conservative stance, according to the Institute of Economic Affairs (IEA) as captured in its recent Economic Outlook for July-August 2024, highlights the complex challenges facing the nation’s monetary policy.

The IEA report suggests that while conditions seem ripe for a substantial rate cut – by about two hundred basis points – the BoG is likely to reduce its policy rate by no more than 100 basis points from its current 29 percent level.

“It is appropriate that the MPC cuts its PR by at least 200 basis points to reflect the sharp decline in inflation…but it’s not likely to cut it by more than 100 basis points,” the IEA said.

This cautious approach comes despite inflation plummeting from 54.1 percent in December 2022 to 20.9 percent in July 2024 – a 33.2 percentage point decline.