There is growing expectation on the Bank of Ghana (BoG) to announce a reduction in the policy rate as the governor prepares to publish results of the Monetary Policy Committee meeting later this morning.
The Policy Rate, which is the rate at which the central bank lends money to commercial banks, has remained at 26 percent for several months.
Speaking to Citi Business News, Economist Dr. Lord Mensah was of the view that all other economic indicators are in the right position to reduce the policy rate.
“With all the indications on the ground we’ve seen inflation taken a dip and also stability in our foreign exchange rate, even though we are going to Christmas times, I think it calls for a review and for me, my expectation is that it comes down,” he advocated.
According Dr. Mensah, a reduction will inure to the benefit of the economy by resulting in the cost of borrowing in the long run.
He stated that the private sector will be the best beneficiary as interest rates go down, making it easy for businesses to borrow to expand their operations.
“Once it comes down., it’s a sign in the right direction because at the end of the day the monetary policy rate is the base of all structures of interest rates , that’s the interest rate that central bank can do lending to the various banks and that in the end they extend the facility or the lending to individuals or business,” he assured .
Dr. Mensah however warned that, the effect of a reduction will take a while to realize its full effect since banks in the country will gauge the market before responding.
“You realize that the monetary policy rate for the past four quarters have been constant although have been stable and the review has not changed it in any way, so the banks are not going to react immediately if you adjust it down,” he said.
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