Standard Chartered Predicts High Interest Rates Persisting as Inflation Delays CBN Rate Cuts

• Standard Chartered expects the CBN to cut interest rates by only 150 basis points in 2026.
• The bank now forecasts the Monetary Policy Rate (MPR) will end 2026 at 25 percent, citing persistent inflation.
• Inflation is now projected to average 15.5 percent next year, limiting room for aggressive monetary easing.

July 13, () — The prospect of significantly lower borrowing costs next year may be fading after Standard Chartered Plc. projected that the Central Bank of Nigeria (CBN) will adopt a more gradual approach to cutting interest rates, citing persistent inflationary pressures that continue to constrain policymakers.

In its latest investment note, the bank revised its outlook for Nigeria’s monetary policy, forecasting that the CBN will reduce the Monetary Policy Rate (MPR) by only 150 basis points in 2026, bringing the benchmark rate down to 25 percent by the end of the year.

The revised forecast marks a more cautious outlook than previously anticipated and reflects concerns that inflation will remain higher than earlier expected, leaving the apex bank with limited room to aggressively ease monetary policy.

Standard Chartered also raised its average inflation forecast for 2026 to 15.5 percent, up from its previous estimate of 12 percent.

It similarly revised its 2027 inflation forecast to 14.7 percent from 13.8 percent.

“We now see inflation averaging 15.5 percent in 2026 compared with 12 percent previously and 14.7 percent next year from a prior forecast of 13.8 percent.

“We now see scope for 150 basis points of policy easing in 2026… taking the monetary policy rate to 25 percent at year-end,” said Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered.

Despite the slower easing cycle expected next year, the bank believes inflation will moderate more decisively after Nigeria’s January 2027 elections, creating room for substantially deeper rate cuts.

It projects the CBN could lower the MPR by 700 basis points after the elections, followed by another 350 basis points in 2028 as macroeconomic conditions improve.

Why the forecast matters

The latest outlook highlights the difficult balancing act facing the CBN as it seeks to tame inflation without placing excessive pressure on economic growth.

At the conclusion of its 305th Monetary Policy Committee (MPC) meeting in May, the apex bank retained the MPR at 26.5 percent, extending its pause after delivering a 50-basis-point rate cut in February.

Policymakers also left the Cash Reserve Ratio (CRR) unchanged at 45 percent for commercial banks and 16 percent for merchant banks, saying more time was needed to assess the impact of previous policy decisions amid renewed inflationary pressures.

For businesses and households, Standard Chartered’s forecast suggests borrowing costs could remain elevated well into 2026.

While higher interest rates continue to support attractive yields on fixed-income investments, they also raise financing costs for manufacturers, small businesses, and consumers seeking credit, potentially slowing investment and economic activity.

The forecast comes as investors await Nigeria’s June Consumer Price Index (CPI), due for release by the National Bureau of Statistics ahead of the CBN’s next MPC meeting on July 21.

Headline inflation accelerated to 15.93 percent in May from 15.69 percent in April, and economists broadly expect June’s reading to edge above 16 percent.

A stronger-than-expected inflation print would likely reinforce expectations that the CBN will keep monetary policy tighter for longer, despite growing calls from businesses for lower interest rates to stimulate growth.