BoG should maintain policy rate to align with trends in domestic economy – Economist

Economist, Daniel Ameteye Anim, believes the Central Bank should maintain the current 14.5 percent policy rate in order to better understand trends in domestic economy.

The Monetary Committee of the Bank of Ghana is expected to end its 97th regular series of meetings today, Friday, November 20, 2020.

The committee’s 97th meeting, which is the last for this year, is expected to review developments of Ghana’s economy and announce the monetary policy rate of the central bank.

The MPC will also initiate proposals for the formulation of the monetary policies of the central bank, provide statistical data, advice and necessary steps for economic growth.

Speaking to UniversNews ahead of the Central Bank’s Monetary Committee second meeting on Thursday, Economist, Daniel Ameteye Anim, stated that his presupposition is for the Bank of Ghana to maintain Ghana’s policy rate at 14.5 percent to help them have a better understanding of the dynamics of the marginal reduction on inflation.

At the central bank’s last meeting in September this year, it kept its monetary policy rate unchanged at 14.5 percent.

Governor of the Bank of Ghana, Dr. Ernest Addison, explained the decision was based on the drivers of economic growth returning to normal prospects for a good recovery.

“Consumers seem to be responding to the gradual lifting of restrictions which provides some scope for meaningful economic activities. Business confidence also increased, but yet to reach pre-lockdown levels,” the Governor explained.

Mr. Anim believes the rate should be maintained for the BoG to have a better understanding of the domestic economy next year.

“There is a strong correlation between inflation and that of the monetary policy rate and even though inflation is marginally declining what I would have been expecting is that Bank of Ghana should still maintain the current policy rate at 14.5% so that they can have a better understanding of the dynamics of the inflationary rate, so that by the close of the year 2020, or early quarter of next year, they will be in a better position to understand the dynamics and the behaviour of how the inflationary pressure is heading towards,” he said.

The Bank of Ghana has since January last year kept the policy rate unchanged six times.

The Monetary Policy Rate will be of key interest to businesses as it influences the interest rate on loans and determines the rate at which the central bank lends to commercial banks.