Many central banks are cutting their interest rates in response to declining inflation therefore the Bank of Ghana must also follow suit and reduce the rate, an economist and director of research at the Institute of Economic Affairs (IEA), Dr John Kwakye, has said.
Ahead of the 120th Monetary Policy Committee (MPC) press conference to be held on Friday, September 27, Dr Kwakye says the policy rate must be reduced drastically from the current rate of 29%.
He argues that since the inflation rate has dropped drastically it will not be appropriate for the BoG to continue to keep the policy rate at 29 percent.
In a post on his X platform, he indicated that many central banks are cutting their interest rates in response to declining inflation.
It is recalled that during the MPC’s 119th meeting, the committee maintained the policy rate at 29% marking the third consecutive time the policy rate of the Central Bank has been held at 29.At the 119th MPC press conference in Accra on Friday, July 26, the Governor of the BoG Dr Ernest Addison said that the decision to maintain the policy rate was part of ongoing efforts to balance economic growth with inflation control in Ghana’s dynamic economic landscape.
Headline inflation per recent data from the Ghana Statistical Service (GSS) declined 20.4 percent in the month of August 2024, continuing its disinflation trend from January 2023.
A 100 basis points (1%) reduction to the current 29% policy rate was made in January this year, and since then the BoG has maintained its prime rate at 29%.
The decision came after a thorough review of the country’s macroeconomic developments over the past two months.
The stability of the policy rate was anticipated to keep commercial banks’ lending rates to businesses unchanged, providing a consistent financial environment for corporate borrowers.
However, Dr John Kwakye said that “BoG and MPC have a duty to bring down suffocating interest rates in Ghana. Following a sharp drop in inflation from 54% to 20%, the decline in the PR from 30% to 29% is grossly insignificant.”
