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Business News of Monday, 21 May 2018

Source: citibusinessnews.com

BoG likely to reduce policy rate again – Razia Khan

A Senior Economist with Standard Chartered Bank, Razia Khan is projecting that the Bank of Ghana may reduce the policy rate today, May 21, 2018.

The Monetary Policy Committee (MPC) of the central bank is expected to announce a policy rate today after concluding its review on the economy.

The MPC, at its last meeting in March 2018 reduced the policy rate by 200 basis points.

The figure dropped from 20 to 18 percent.

Razia Khan tells Citi Business News a reduction will be in fulfillment of the central bank’s quest to get private businesses access to credit.

“The faster than expected achievement of single digit inflation is good news…the fact that it is come about even sooner is good news. There doesn’t seem to be a threat to that in that the exchange rate is a bit stable while the foreign exchange reserves are at a healty level and that support the case for more easing,” she explained.

Rhazia Khan added, “The Bank of Ghana may well feel that it has to wait and consolidate the easing in one big move.”

The Governor of the Bank of Ghana, Dr. Ernest Addison, at the recent MPC meeting with the media, attributed the decision to reduce the rate to the central bank’s moves to achieve the annual inflation target.

According to him, the Monetary Policy Committee (MPC) decided to reduce the policy rate to also help ease the burden of interest payments on the budget.

“The Committee noted that the current inflation forecast provides scope for monetary policy to realign interest rates, translate the disinflation gains achieved so far to the market, and reinforce the fiscal consolidation process by easing the burden of interest payments on the budget. Under these circumstances, the Committee decided to reduce the monetary policy rate by 200 basis points to 18.0 percent”.

The policy rate is also expected to influence the lending rates of commercial banks in Ghana, subsequently.