The Monetary Policy Committee (MPC) of the Bank of Ghana (BOG) has maintained the policy rate at 16%. In a press release announcing the decision of the first MPC meeting in 2020, the BOG Governor sited a more stable economic environment. Inflation in Ghana and most emerging and advanced markets remained somewhat stable. Therefore on both the global and local stage, policy rates have been cut with UK still hovering under 1 percent at 0.75%. This is the 6th successive time, since January 2019, that the MPC has maintained the rate at its current rate.
Other supporting economic indicators have seen some improvements year-on-year. In their view “Overall, the economy presents fairly resilient and robust performance with regards to output growth and a strong trade and payments position. The economy is positioned firmly on the path of stability with inflation forecasted to stay within the medium-term target band of 8±2 percent, barring any unanticipated shocks”, the statement said.
Policy Rate Unchanged; The Impact
With the rate unchanged, one may expect lending rates to remain stable at its current average of 23.6%. However, the one very significant indicator, the exchange rate, may mitigate against the stability. Due to the impact of the forex rate on the overall economy, banks may not be hold lending rates unchanged. The Ghana Cedi has already been forecast to depreciate by some 8% in 2020. The Cedi depreciated by 12.9% in 2019, according to the MPC statement. Considering the risks with election year, it is likely that pressures from overspending may require that MPC rates to be reviewed upwards
It is also expected that rate of return of investments would remain stable with the 91-day T-Bill returning 14.7%. This would most likely will see marginal increases as pressure results in the upward adjustment of the policy rate.
The next MPC announcement date is scheduled for 30 March 2020
