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The Central Bank of Nigeria and other monetary authorities have been warned by the International Monetary Fund not to hastily reduce interest rates. The IMF emphasized the importance of maintaining price stability in the face of uneven global growth and persistent inflation pressures.

In its most recent 13-page update of the World Economic Outlook, the IMF noted that while a few economies are seeing slight output recoveries, inflation remains a significant challenge. The Fund states that it is essential for central banks to find a fragile equilibrium between fostering growth and avoiding a new inflation spike.

“Monetary policymakers in countries where inflation is at or close to target should rely on a forecast-centered approach,” the report said.

“Where economies are experiencing negative demand shocks, a gradual reduction in policy rates may be considered to cushion economic activity, provided risks to price stability objectives are contained,” it added.

The IMF indicated that in areas where inflation continues to exceed target levels, policymakers should take a careful, data-informed approach.

“In economies facing adverse supply shocks, policymakers confront complex trade-offs between the risk of a growth slowdown and the risk of persistent inflation. In such cases, further monetary easing should proceed only where there is robust evidence that inflation expectations remain anchored and inflation is returning toward target,” the document added.

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