Bank of Ghana’s decision to maintain policy rate at 29% is difficult to justify – John Kwakye
The Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye, is unhappy with the decision of the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) to maintain the policy rate at 29 percent.
He expected the rate to go down following the drop in inflation rate because the BoG earlier explained that the upward adjustment of the rate to 20 was due to the rising inflation.
With the inflation rate dropping to 22.8% in June 2024, Dr Kwakye expected the policy rate to also drop.
“Bank of Ghana’s decision yet again to stay the Policy Rate (PR) is difficult to justify when inflation has dropped from 54% to 23% unless the Bank itself doesn’t believe in the effectiveness of the PR,” he wrote on his X platform on Monday, July 29.
The MPC maintained the policy rate at 29% marking the third consecutive time the policy rate of the Central Bank has been held at that 29%.
At the 119th MPC press conference in Accra on Friday, July 26, the Governor of the BoG Dr Ernest Addison said that the decision to maintain the policy rate is part of ongoing efforts to balance economic growth with inflation control in Ghana’s dynamic economic landscape.
Headline inflation per recent data from the Ghana Statistical Service (GSS) declined slightly to 22.8% from 23.1% in May, continuing its disinflation trend from January 2023.
A 100 basis points (1%) reduction to the current 29% policy rate was made in January this year, and since then the BoG has maintained its prime rate at 29%.
The decision comes after a thorough review of the country’s macroeconomic developments over the past two months.
The stability of the policy rate is anticipated to keep commercial banks’ lending rates to businesses unchanged, providing a consistent financial environment for corporate borrowers.
