The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) will begin its regular meetings from today, Wednesday, July 22, 2020, through to Friday, July, 24.
This will be the 95th meeting of the MPC, which will seek to review developments in the economy and make certain critical decisions.
At the end of the meeting, it will also come out with the Monetary Policy Rate which is of keen interest to businesses, as it determines the rate at which the BoG lends to commercial banks, and also subsequently, influences the interest rate on loans offered to customers.
Already, businesses have shared their complaints about how the policy rate does not often reflect on the interest rate on loans as expected.
Recap of the 94th Monetary Policy meeting
At the 94th conference in May 2020, the Monetary Policy Committee maintained the policy rate at 14.5 per cent, citing among other things the impact of the COVID-19 on businesses and the need to cushion them.
According to the Governor of the BoG, Dr Ernest Addison noted that the recent rise in inflation was projected to peak in the second quarter and begin to return to the disinflation path in subsequent quarters with inflation settling within the medium-term target band by the end of the year.
“On the growth outlook, baseline projections show a sharp downturn in GDP growth with the economy operating below capacity in the medium-term. Under the circumstances and given the balance of risks to inflation and growth, the Committee decided to keep the policy rate unchanged at 14.5 per cent,” he stated.
Dr Addison also noted that the lockdown resulted in a decline in the currency as consumers resort to the use of electronic modes of payment.
He said general economic uncertainty reduced demand for credit, as commercial banks tightened their credit stance.
Price developments
After remaining flat at 7.8 per cent for three consecutive readings (January-March 2020), headline inflation jumped up in April to 10.6 per cent—outside the Bank’s inflation target band.
The sharp rise in inflation was attributed to increased demand for food items stemming from the two panic-buying episodes preceding the market fumigation exercises across the country and the partial lockdown in both Accra and Kumasi—the two largest cities.
This led to exaggerated food prices in April. Food and non-alcoholic beverages prices rose to 14.4 per cent, significantly higher than the 8.4 per cent recorded in March 2020. Non-food inflation increased to 7.7 per cent in April 2020 from 7.5 per cent in March 2020.
Policy rate to be maintained or reduced further – Economist
Meanwhile, ahead of the MPC’s meeting, an Economist, Dr. Lord Mensah, has said he expects the policy rate to be maintained or reduced further to reduce the burden on businesses hit by the coronavirus pandemic.
Although the BoG’s meeting will end on Friday, July 24, 2020, the final decision arrived at will be announced on Monday, July 27, 2020.
Also, this MPC meeting will be taking place alongside the Finance Minister, Ken Ofori-Atta’s presentation of the Mid-year budget review on Thursday, July 23, 2020.
