The Monetary Policy Committee (MPC) at its last meeting said that the level of unemployment in the country needed to be addressed so as to “moderate the restiveness” among citizens.
The committee which had a meeting on Monday and Tuesday held a consensus said that despite the exit in the fourth quarter of 2020, it was important to continue to focus on the recovery process by taking actions that stimulated output growth and created employment.
It also said that the government needed to strengthen its partnership with the private sector so as to increase funding for the “huge infrastructural financing deficit”.
It said, “In its consideration of whether to tighten, hold or loosen, therefore, the Committee felt that with inflation at a 3-year high and price stability being the Bank’s core mandate, a contractionary policy stance may be required to tame the rising trend. It nevertheless feels that tightening will hike the cost of capital and hamper investments required to create employment and continue to boost recovery.
“On the other hand, MPC thinks that whereas loosening would lower rate and improve access to credit which will drive investment, reduce unemployment and stimulate aggregate demand, it feels that loosening will create excess liquidity, which will intensify demand pressure on the foreign exchange market, thereby leading to further depreciation in the currency.”
It concluded that a position that encouraged the continued use of various interventions to “deploy liquidity into employment generation and output stimulating sectors of the economy would be desirable.”
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