Economist, Dr. Lord Mensah, says he does not foresee an increase in the policy rate anytime soon.
According to him, the Central Bank is likely to either maintain or reduce it further to cushion businesses as they are already struggling due to the impact of the Covid-19.
The Policy rate determines the rate at which the BoG lends to commercial banks, which subsequently influences interest rate on loans.
The Monetary Policy Committee of the Bank of Ghana is set to begin its meeting on Wednesday, July 22, to access the health of the economy and announce among other things, a policy rate.
Dr. Lord Mensah told Citi Business News 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.
With the impact of the coronavirus having a serious impact on the global economy, the Monetary Policy Committee (MPC) of the Bank of Ghana, earlier this year maintained the policy rate at 14.5 percent.
That was the first time the rate had been kept unchanged in many months after it was reduced by 150 basis points.
The MPC at the time said the decision to keep the policy rate unchanged, was to control inflation from going out of gear.
Already, many businesses, in the wake of the COVID-19 pandemic and its impact, have appealed for a further reduction in the policy rate by the Bank of Ghana.