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Bankers, businesses urge BoG to reduce policy rate

March 26, 2018, 11:41 a.m.

Banking industry players are anticipating nothing but a reduction in the policy rate by the Bank of Ghana.

It follows what they cite as favourable conditions that warrant a further reduction in the rate at which the central bank lends to commercial banks for onward lending to customers.

The Monetary Policy Committee (MPC) of the Bank of Ghana is later today, Monday, expected to conclude its meetings with an announcement of the policy rate which is at 20 percent.

Speaking to Citi Business News ahead of the announcement, an Economist with Barclays Africa’s sub Saharan group, Ridle Markus said he is highly optimistic of a reduction.

In his view, the expected increase in oil exploration activities and the projection of a stable currency, should prompt a drop in the policy rate.

“We’re not worried about the currency; there’s a potential for 2.5 billion dollar Eurobond inflows coming through in the next couple of months. Also, the additional oil inflows will be supportive of the currency. There’s a strong case to be made that the currency could actually continue to remain around current levels even drifting slightly stronger, which then becomes very favorable to inflation. So those are a couple of reasons why I think they should be less precautionary a little bit and for cutting the policy rate.”

The Bank of Ghana has reduced the policy rate by 550 basis points over the last one year.

The figure has dropped from 25.5% to 20 percent currently.

The Managing Director of Zenith Bank, Henry Oroh also tells Citi Business News he is hopeful the MPC will reduce the policy rate to sustain the impact on private sector growth.

“Interest rates have also moved down, because the government wants to support the real sector. If interest rates go up, the cost of business also goes up but the government wants to create an environment with cheap cost of business. And I think they’ve done so well with their previous Monetary Policy Committee decisions they’ve taken.”

He added, “So I believe whatever decision they take this time around will be complementary to the previous decisions, and it will all be driven to creating macro-economic stability in the area of interest rate, inflation and exchange rate.”