Election Spending, Possible Hike In U.S Rates To Sway MPC Decision

Election spendings and a possible hike in U.S rate by September may be key deciding factors when the Monetary Policy Committee (MPC) decides the direction of the Monetary Policy Rate (MPR) tomorrow.
Already, so much have been spent on the Ekiti governor’s election, with that of Osun state in the offing.
FSDH researchers expect that the US Federal Reserve may increase rate when it meets in September and December 2018. The expected Fed’s action may push funds further into the US Treasury market, and also push global yields upwards, leading to additional pressure in emerging markets therefore, tight monetary policy will be appropriate in this context.
FSDH Research also notes that possible capital flight and adverse developments in the crude oil market are also possible risks to stable prices.
Similarly, analysts at Afrinvest have highlighted that: “Amid concerns on policy normalisation in global systemic central banks, rising yields on emerging market assets – resulting from downside risk factors consequent on sustained foreign capital flow reversals since Q2:2018, flimsy domestic economic recovery, steady moderation in inflation, polity fragilities and disquiets around fiscal spending ahead of the 2019 general elections, the MPC must keep a delicate balance between and price stability.
“In addition, risk factors to exchange rate stability, which we believe is the current policy anchor, in light of ongoing capital outflows, may tilt the scale towards a hawkish stance”.

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