The Monetary Policy Committee of the Bank of Ghana will later today announced developments in the Ghanaians economy and announced Policy Rate-the rate at which commercial banks borrow from the Central Bank.
Ahead of this meeting, some research institutions believe the base lending rate will remain same because of perceived risks in the fiscal economy.
Others are however of the opinion that the Central Bank will slash the policy rate by about 0.5% to stimulate lending in the economy, particularly at a time when economic recovery is needed critically.
Key macroeconomic indicators that the Central Bank will review are inflation or pricing, exchange rate and interest rate.
So far inflation has been fairly stable, hovering around the 10% bracket; and the Central Bank will be mindful of keeping prices very low and stable in order to keep interest rates also low.
Also, the exchange rate market has witnessed some strong performance with the cedi appreciating by 0.6% to the dollar since the beginning of the year.
At the forex bureau, it has even fared better.
The cedi’s strong performance so far this year has been attributed to the Central Bank’s forward forex policy intervention, which it sells dollars every fortnight, diversification of Ghanaian exports as well as stable demand for the US dollar.
Interest rates have also been fairly stable, hovering around 13.80% [rate for 91-day T-Bill].
There had been large demand for T-Bills because of the relative attractive yield and government appetite for borrowing.
However, in recent times, government has rejected some of the bids for the short term instruments.
BoG kept policy rate at 14.5%
The last time the MPC met in January 2021, the Policy Rate was kept same.
The MPC chaired by Governor Dr. Ernest Addison cited risks to growth and inflation as the reasons.
“Headline inflation, while on steady decline in the early months of the last quarter of 2020, jumped in December to 10.4%, outside the target band of 8±2%, driven by food prices. However, the Bank projects headline inflation to return to target in the second quarter of 2021. Risks to inflation in the near-term are broadly contained, but short to medium-term risks emanating from the fiscal expansion and rising crude oil prices are emerging”
“Under the circumstances, and given the balance of risks to inflation and growth, the Committee decided to keep the policy rate at 14.5%”, it said.
Source: Kwame Yamoah
