Years after the Great Depression in 1930 , economists and in particular Milton Friedman agreed that raising interest rate caused the Great Depression or at least contributed to it protracted period.
Years after the global financial crisis of 2008, economists also agreed that hiking interest rate may have contributed to the crisis.
Point is, there are various components to inflation and as long as we get an optimal liquidity level, further hike to interest rate may just be counter productive.
In Nigeria’s context, right now liquidity is at an optimal level or sub optimal as some may argue hence has little bearing to inflationary pressures.
With this in mind, CBN must ask itself one simple question, how much of FPIs do we need to stabilize naira since that is the overriding concern in this case ?.
Just maybe Cardoso need to press the brake on hiking interest rate. Beyond avoiding a recession, future hikes may slow down our recovery process.
By Gbadebo Michael Oparinde
