With the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) set to announce developments in the economy during the last three months and also make projections for the next quarter this week, economic analysts have expressed varied opinions regarding the maintenance or change in the Prime Rate- the rate at which the Central Bank does its lending to universal banks. The benchmark indicator of the Central Bank would be the major issue that most analysts, market watchers and private sector players would be keen in monitoring. In Ghana, the difference between deposit interest rates and lending rates are so wide that anytime interest rates rise, the banks tend to benefit while consumers suffer. While Nana Amoto Mensah, an economic analyst with Ecobank Development Corporation (EDC) expects the current prime rate of 18.5 percent to be preserved since inflation pressures still exist, Richard Agala, Head of Research, IC Securities, an investment bank, anticipates the marginal decline in the rate to bolster economic activity. However, Mr. Agala stated that the rate might be the same to allow the new Governor to implement his policies. Sampson Akligoh, an economic analyst with Databank also explains that though inflation would further decline in September whilst the outlook is also favorable, a more cautious approach would force the MPC to maintain the interest rate at the same level. “As much as the Prime Rate is targeted at inflation, the outlook for inflation for the next three months looks positive. Thus the government should take bolder steps to reduce the interest rate. However, it might want to continue with the austerity measure to maintain the fiscal situation of the country,” said Akligoh. He added that keeping interest rates low would boost the private sector to improve growth this year which the International Monetary Fund has pegged at 4.5 percent. Speaking in separate interviews with BUSINESS GUIDE, Mr. Mensah said though inflation had remained stable at 19.65 percent for August, it had not been that low to push for a reduction in the Prime Rate. “If inflation has been driven by external factors, tackling it with internal measures would not help what we want to achieve.” Since economic managers want to stay cautious because of internal and external happenings, Mr. Mensah added that the benchmark interest rate would remain the same. “We have seen an MPC that has not made changes to its policy over the last months, hence we may not expect significant changes in the projections,” said Mr. Agala. Ideally, looking at the fact that the half year budget was aimed at stabilizing the economy, there should have been an attempt to marginally reduce the interest rate indicator to move the economy from stabilization to growth. “The outlook of the economy looks robust so we should do things that would involve a vibrant private sector.” The BoG has been able to keep the Ghanaian Cedi relatively stable against the major foreign currencies for the last two months and was urged to adopt a new foreign exchange policy to support a steady depreciation of the country’s currency in the medium to long-term. Presently, the country’s inflation rate indicates that the Bank of Ghana’s inflation target policy to mop up excess liquidity has helped check excessive spending in the economy. This indicates that the MPC might not alter the current Prime Rate. Some economic indicators including fiscal and trade deficits, foreign reserves and other important indicators would also be reviewed by MPC. It would also assess the business risk factors and announce the evaluation of the economy and other new developments in a press conference next week. Additionally, the committee is expected to evaluate the Central Bank’s assessment of the economy and suggest appropriate policies to adopt. Source: Business Guide/Ghana