IMF Warns Cbn Against Hasty Rate Cuts, Urges Focus on Price Stability

|By Babatunji Wusu

The International Monetary Fund (IMF) has cautioned the Central Bank of Nigeria (CBN) and other monetary authorities against rushing into interest rate cuts, insisting that protecting price stability must remain a top priority amid uneven global growth and persistent inflation pressures.

In its latest 13-page World Economic Outlook update, the IMF noted that while some economies are recording modest output recoveries, inflation continues to pose a significant threat to macroeconomic stability.

The Fund stressed that central banks face a delicate task of stimulating economic activity without triggering a fresh surge in inflation.

It advised countries where inflation is at or near target levels to adopt a forecast-driven approach, noting that policy rate adjustments may be considered only when risks to price stability remain contained.

However, for economies where inflation remains above target, the IMF urged policymakers to proceed with caution and rely strictly on data-driven decisions.

The report further warned that nations experiencing adverse supply shocks confront difficult trade-offs between slowing growth and entrenched inflation, adding that monetary easing should only occur where there is strong evidence that inflation expectations remain anchored and inflation is trending toward target levels.

The IMF also emphasized the need for clear and consistent communication by central banks to sustain public confidence and keep inflation expectations stable, while reaffirming the importance of legal and operational independence of monetary authorities for long-term economic stability.

In Nigeria, inflation stood at 15.15 percent in December, while the Monetary Policy Committee (MPC) maintained the benchmark interest rate at 27 percent during its November 2025 meeting.

The CBN’s next MPC meeting is scheduled for February 23 and 24, 2026.