Financial expert predicts BoG will maintain monetary policy rate in next meeting

Kofi Arkaah, a renowned financial analyst, believes that the Bank of Ghana will most likely maintain its monetary policy rate this year during its monetary policy meetings.

Speaking as a guest on The Point of View on Citi TV, Kofi Arkaah explained that the government's expenditures may increase, and inflation may slightly rise because 2024 is an election year.

Reacting to a decision by the Bank of Ghana (BoG) to lower its Monetary Policy Rate by one per cent, he suggested that it's not beneficial for the BoG to lower the interest rate. In essence, the lowered rate means that the rate that commercial banks use as a reference for lending has been reduced from 30 to 29 per cent after six months.

"The exchange rate has somehow stabilized, still depreciating, but at a much lower pace. I don't think the Bank of Ghana is likely to cut the [monetary policy] rate at the next meeting or the following meeting after that.

"The reasons are the following: we are in an election year, and it's an all-political economy. The election is going to see increased spending, which means inflation is likely to take up slightly. I don't think it's in the best interest of the economy for the Bank of Ghana to be cutting interest rates at this point," he explained.

Kofi Arkaah expressed concerns and questioned Ghana's ability to implement a negative interest rate, as practised in developed countries. He believes that offering investors a real return is the most efficient way to generate revenue.

He said, "Japan is running negative interest rates; I don't think Ghana should be thinking about implementing negative interest rates or anything like that. We are not there."

He added, "The only way to generate revenue is to provide investors with a real return. The investors are looking at an inflation rate of 23.2%, and you have to get treasury bills higher than that. The growth return you are talking about is 12% to the investors, that is going to attract investors," he suggested.

EAN/FNOQ

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