Monetary Policy Rate likely to be maintained at 23.5 percent

In what may appear to be a disappointing news for industry, some economists are predicting that the central bank will maintain the monetary policy rate in its next review instead of further reducing it as has been the trend.

The monetary policy committee Friday began its 76th policy meeting to review some developments in the economy to announce a new policy rate, with the prime objective of ensuring price stability and low inflation and support output and employment growth.

The policy rate measures the rate at which the central bank lends to commercial banks, of which industry can also access. In the build up to the announcement, industry is upbeat about a further reduction, especially looking at how the rate was reduced from 25. 5 percent to 23.5 percent.

According to GN Research, many economic activities have happened on both the domestic and the global fronts since the meeting in March. At the global level, commodity prices have decreased with the prices of the country’s major exports cocoa and gold falling by almost US$200 and US$28 respectively.

Their research says these happenings with some other domestic factors will cause the MPC to maintain the policy rate.

For financial analyst, Courage Kingsley Martey, a stronger case cannot be made for a reduction, until July, where a stronger case can be made “The latest increase in the inflation rate as a result of the prices in transport fares and the caution by the IMF will prevent any further reduction”, he stated.

In an interview with 3FM Business News, Courage Mantey said the central bank should rather be cautious and maintain the rate until July where a stronger case can be made for a reduction. Economist Dr. John Gatsi agrees, he believes the key indicators for the a further reduction are not visible.

“The reasons given by the central bank was not convincing at the last reduction. If they will go by those reasons especially on inflation, then it will be maintained”, he said.