BoG maintains policy rate at 16%: what does this mean to the private sector?
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG), for the third consecutive time, maintained the country’s policy rate at 16 percent, citing risks to macroeconomic stability brought on by increments in utility tariffs, subdued business sentiments, and the slow pace of fiscal consolidation as reasons.
The Committee noted that despite these risks, the BoG’s core mandate of price stability appears to be on track. Also, the underlying inflationary pressures, as well as inflation expectations, are well-anchored whereas exchange rate depreciation has diminished.
The decision to maintain the policy rate at 16 percent, however, comes as bad news to the private sector. Lending rates are not expected to come down any time soon. Given that the policy rate plays a major role in determining the Ghana Referencing Rate, which is the base rate that defines banks’ lending rate, cost of borrowing to businesses is not expected to decline in the short run.