An Economist, Dr. Lord Mensah, has said that he does not foresee the Bank of Ghana (BoG) increasing the policy rate anytime soon.
According to him, the Central Bank is likely to either reduce or maintain the policy rate to further cushion businesses as they are already struggling due to the adverse impact of the coronavirus.
The policy rate is what determines the rate at which the BoG lends to commercial banks, which also subsequently, influence the interest rate placed on loans given.
The Monetary Policy Committee (MPC) of the Bank of Ghana will begin its meeting on Wednesday, July 22, 2020, to access the viability of the economy and based on the outcome to announce the policy rate.
However, Dr. Lord Mensah in an interview says it will be prudent for the BoG to reduce the rate to ease the burden on businesses.
“If you look at the happenings on the ground coupled with the COVID-19 cases, you could see that businesses are not that active. And in every economy when businesses are not all that active, it could be as a result of the bank not providing enough funds and as a result of money not being in people’s pocket to enjoy the services rendered by established businesses.”
“…And so as the Monetary Policy Committee that controls how money comes into the system and how money is taken out of the system, I will call for an ease in the system that is a reduction. This means that if we are to go by the transmission of the monetary policy into the interest rate structures, then obviously we could say that a reduction will build up into lower interest rates so that businesses and individuals can easily walk to the bank to do business,” he said.
Earlier, due to the impact of the coronavirus on the global economy, particularly Ghana, the Monetary Policy Committee (MPC) of the Bank of Ghana, maintained the policy rate at 14.5 per cent.
That was the first time the rate had been kept unchanged in many months after it was reduced by 150 basis points. According to the MPC, at the time, said the decision to keep the policy rate unchanged, was to control inflation from going out of gear.
Previously, many businesses, in the wake of the COVID-19 pandemic and the negative effect posed, appealed to the BoG for a further reduction in the policy rate.
