The slowdown in inflation in the last month of 2019 and the relative stability of the local currency in the first month of 2020, gives the Monetary Policy Committee of the Bank of Ghana room to reduce its interest rate, the Managing Director of Barclays Ghana, Abena Osei-Poku has said.
The policy rate, which indicates the rate at which the central bank lends to commercial banks, currently stands at 16 percent.
With the Committee set to meet from January 27-30, 2020, and an announcement of the policy rate decision set for Friday, January 31, the Barclays Managing Director said reducing the policy rate will have implications for banks’ lending rates.
Speaking on the Citi Breakfast Show on Wednesday, January 22, Mrs. Osei-Poku stated that the prevailing lending rate is influenced by a number of factors such as the central bank’s own lending rate, that is the Monetary Policy Rate.
“At the end of 2019, you will realize that inflation was much lower, less than 8 percent. We have also seen some stability since the stability in the exchange rate. The Monetary Policy Committee of the central bank is scheduled to meet next week, and I think they could very well even look at reducing the policy rate,” she added.
According to her, a reduction in the policy rate would drag downwards the Ghana Reference Rate which is directly tied to banks’ lending rates to their customers.
The Bank of Ghana has kept its policy rate unchanged since January 2019 after five meetings.
Within that period, the cedi lost more than 10 percent of its value against the US dollar, while inflation dropped from 9.2 percent in February to close the year at 7.9 percent, thanks to a change in the inflation base year in August which brought down the rate.