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Interest Rates Behaviors and Monetary Policy Response

Author: Central Bank Of Nigeria (CBN) - Education Series

A stable deposit base as opposed to volatile, short-term funds has started to impact positively on interest rates stability. In order to fast track interest rates stability, the CBN introduced a new framework for the implementation of monetary policy in December of 2006. As part of the new framework, the Bank established a standing deposit and lending facility and replaced the MRR with the Monetary Policy Rate (MPR) which was initially set at 10.0 per cent (but reviewed downwards subsequently). The entire system was designed as a corridor with the lending facility as the upper bound of the corridor while the deposit facility served as the lower bound. The entire corridor had a width of 600 basis points with the MPR at the centre….

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