Commercial Banks are expected to reduce their interest rates in line with the latest cut in the Bank of Ghana's policy rate by 150 basis points from 15 per cent to 13.5 per cent. Currently, commercial banks pay average interest rates on deposits between the range of 8.60 per cent and 10. 50 per cent, while they maintain rigidly high interest rates, which hover between 29 percent and 32 per cent. This is in spite of the fact that all the macroeconomic indicators, such as Treasury bill rates, inflation and monetary policy rates, have seen consistent decline over the past 12 months. But Mr. Amissah-Arthur said that this time his ‘magic wand' would work and that borrowers should see an easing of the cost of borrowing The latest reduction in the policy rate brings the cumulative reduction for the year so far to 450 basis points. This is the third cut in the rate since February and it comes on the back of the lowest inflation rate in several years. The cut in the policy rate, which is the rate at which commercial banks borrow from the Central Bank, is the latest attempt to get commercial banks to lower their own lending rates. The Central Bank Governor, Mr Kwesi Amissah-Arthur, said at a packed news conference in Accra that the drop in the policy rate was due to the stability in the disinflation process. "The anticipated continued slowdown in inflation in the medium term, together with the need to restore the growth process, provides scope for monetary policy easing,” he said. According to the governor, inflation, which last month fell to a single digit for the first time in over four years, to remain around the bank's central target of 9.2 per cent. That, he said, would be achieved in part through lower food and petroleum prices, as well as fiscal consolidation. "Early indications suggest that the pace of economic activity may have bottomed out and has begun showing signs of picking up, an early indication of the restoration of the growth process," he added. The inflation rate fell to 9.5 per cent in June, the 12th consecutive decline, compared with a five-year high of 20.7 per cent in June last year. Price growth slowed after the country's currency, the cedi, halted its decline against the dollar last year. After failing by 15 per cent in the first six months of 2009, the cedi has gained three per cent over the past 12 months. The governor, who singled out Standard Chartered Bank Ghana for praise for its quick response to policy cuts, said the Central Bank would give some incentives to commercial hanks whose cost of borrowing reflected the policy rates. Though he did not say what those incentives were, it is expected that the BoG will easily yield to requests for grants by the banks that respond to policy cuts. "We are in discussions with the executives of the commercial banks and they have indicated to us what their problems are and we are yet to agree with them on certain terms," he said. According to him, the Monetary Policy Committee had also noted the concerns of the public over the slow pass through of the lower policy rate to the lending rates of the banks.