The International Monetary Fund has advised the Central Bank of Nigeria and other monetary authorities to exercise caution when considering interest rate cuts, highlighting the importance of maintaining price stability amidst uneven global growth and persistent inflation pressures.
In its recent World Economic Outlook update, the IMF noted that while some economies are experiencing modest recoveries, inflation remains a significant challenge. The Fund emphasized that central banks must strike a balance between stimulating growth and preventing a resurgence of inflation. This delicate balance is crucial in countries where inflation is at or near target levels, where monetary policymakers should adopt a forecast-centered approach.
For economies facing negative demand shocks, a gradual reduction in policy rates may be considered to cushion economic activity, provided that risks to price stability objectives are contained. However, in regions where inflation remains above target levels, policymakers should adopt a cautious, data-driven stance. The IMF also stressed that in economies experiencing adverse supply shocks, further monetary easing should only proceed if there is robust evidence that inflation expectations remain anchored and inflation is returning to target.
Clear and consistent communication by central banks is essential for keeping inflation expectations firmly anchored, the IMF added. The Fund reaffirmed the importance of the legal and operational independence of monetary authorities in achieving sustainable growth and price stability.
In Nigeria, inflation stood at 15.15 percent in December, with the benchmark interest rate held at 27 percent following the Monetary Policy Committee meeting in November 2025. The Central Bank of Nigeria’s next MPC meeting is scheduled for February 23 and 24, 2026, where these considerations will likely influence decision-making. As global economic conditions continue to evolve, the IMF’s guidance serves as a reminder of the complex trade-offs involved in monetary policy decisions, underscoring the need for careful consideration and data-driven approaches to maintain economic stability.
