BoG has no moral right to ask banks to cut down on lending rates – Economist

An Economist, Prof. Godfred Bokpin, has stated that the Bank of Ghana’s request for banks to cut their lending rates is unfounded.

According to the finance lecturer at the University of Ghana Business School even though this may be a good move by the banks, coming from the central bank is an odd call.

His remarks followed the Bank of Ghana's request that banks reduce their lending rates after a third consecutive drop in inflation.

“Generally, we will say it is a good call but to the extent that it is coming from the Bank of Ghana is even more interesting. The question will be how will Bank of Ghana’s policy rate respond in the next couple of months. Because if it is the considered view of the central bank that the process of disinflation has become entrenched and will come down sharply, then that should also reflect in the policy and treasury bill rate,” Bokpin was quoted by citinewsroom.com.

Bokpin added that “There are three variables that are very important in the Ghana reference rates coming down. The policy rate, treasury bill rate, and the interbank rate. So, if the rate at which the Bank of Ghana itself will be lending to the commercial banks does not come down drastically to reflect the reduction in inflation, it does not have the moral right to ask commercial banks to do more than it is willing to do.”

According to the Ghana Statistical Service, inflation dropped to 41.2 percent for the month of April 2023 from 45% in March.

This represents a 3.8 percentage point decrease from the 45.0 percent recorded in March 2023.

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