The Bank of Ghana has reduced the policy rate to 17%. This was announced on Monday, 21 May 2018. This is the sixth reduction in a year and half.
The last time the rate stood lower than 17% was in November 2013 when the rate was 16%. The downward spiral began from November 2016 when the policy rate was 25.5%. The current rate at 17% is a significant reduction from the 25.5%. The high interest rates regime was a good time for investors and pension funds. It offered investment returns for investors and pension funds but higher borrowing rate for borrowers. The investment environment has responded very well to the policy rate reductions but the same cannot be said of borrowing rate which still remains relatively high. According to the BOG, the essence of the reduction is to curb inflation.
The reduction is a welcome development and economists have remained optimist about the economy, but Ghanaians would still await the expected impact in terms of lower cost of borrowing and the general briskness of the economic environment.
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Must Read: Policy Rate Decline: Why Borrowing Rates would still be High
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