The Monetary Policy Committee of the Bank of Ghana will begin its 97th quarterly meeting from today with all eye on whether the policy rate – the rate at which commercial banks borrow from the Central Bank- will go down.

To be chaired by the Governor, Dr. Ernest Addison, the seven-member committee is expected to review developments in the Ghanaian economy in the last three months and make projections for the next quarter.

But the most important issue to be at the center of discussion is whether to cut the base lending rate to ease the cost of credit in the country.

The policy rate presently stands at 14.5 percent but average lending rate hovers around 21 percent, a situation many businesses have described as still high and keeping cost of operations relatively expensive.

Some analysts’ believe the policy rate will be maintained because of the potential upside risks to inflation during Christmas when there could be increased spending and the potential desire by retailers to take advantage of the demand to increase prices.

The Governor has also hinted of a possible maintenance of the policy rate, saying, the monetary policy rate will respond accordingly to fiscal measures implemented to deal with the economic challenges.

“We probably need to have patience to allow the system to consolidate itself and expected interest rate to go down consequently. And I [Dr. Ernest Addison] said so that if you look at the profile of policy rate over the last three years, we have consequently gone down till January this year when we stopped at 14.5% and the monetary policy rate have sort of stayed there. They are reasons why it has stayed there; we are looking at the impact of the shocks, the impact of the shocks on government finance and budget.”

Overall, the committee will adopt a monetary policy that will help to reduce inflation and interest rate, as well as effectively regulate money supply in the short term.

September 2020 MPC report

The MPC attributed the maintenance of the policy rate at 14.5% in September 2021 due to risks to the immediate outlook for inflation and growth, brought by the impact of covid-19 pandemic on the economy.

“Under the circumstances, the Committee’s view is that risks to the immediate outlook for inflation and growth are broadly balanced and decided to keep the policy rate unchanged at 14.5 percent”, the Governor said in his conclusion remarks in the MPC report.

He however said the drivers of economic growth are returning to normal with prospects for a good recovery, adding monetary and fiscal policies have been supportive, providing the necessary underpinnings for the economy to withstand the negative output shock arising from the pandemic.

However, he emphasized that this has come at the cost of moving away from the consolidation path and could pose a risk to long-term macroeconomic stability if decisive measures are not taken to define a feasible fiscal adjustment to stabilise debt.