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Policy rate drops to 23.5%

The policy rate is the rate at which commercial banks borrow from the central bank for onward lending to their customers.

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The Governor of the Central Bank Dr Abdul Nashiru Issahaku revealed this at a press briefing to close the second MPC meeting for 2017.

Dr Issahaku said factors for the reduction include the declining inflation rate amongst others.

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“The Committee noted that underlying inflation pressures have eased considerably and inflation is projected to trend downwards the medium term target of 8 plus or minus 2 percent.”

“Recent developments in inflation imply money increasing tightening consequently the MPC has decided to reduce the policy rate by 200 basis points to 23.5 percent,” he added.

The Governor explained that due to the level of confidence of an improved inflation and indication of low growth the MPC needed to be reduced.

“However there are indications that growth is likely to remain significantly below potential which alongside an improved inflation outlook, provides some scope for monetary policy easing.”

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This is the second time that the MPC has reduced the policy rate after keeping it unchanged at 26 percent for a greater part of 2016.

This represents a 200 basis point reduction from the previous figure; 25.5 percent.

Dr Issahaku said he was optimistic the development would help boost lending and stimulate growth.

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