Dr. Kofi Wampah
Lending rates of commercial banks are expected to go up after the Bank of Ghana (BoG) increased its policy rate from 21 to 22 percent.
The increase in the policy rate, according to the Central Bank, is to reduce inflation which currently stands at 16.8 percent and facilitate the achievement of macro-economic stability.
The current policy rate, which is the highest since December 2003, was announced yesterday at a press conference held by the Monetary Policy Committee (MPC) of the Bank of Ghana.
The policy rate indicates the rate at which commercial banks can borrow from the Central Bank.
Interest rates, which currently hover around 35 percent on the average, are expected to go up owing to the increase in the policy rate.
Dr. Kofi Wampah, Governor of Bank of Ghana, who addressed the media yesterday, said the increment in the policy rate could have been higher but due to good fiscal consolidation, it was increased by 100 basis points.
He however said the committee would continue to monitor the situation and take the appropriate action in line with the fiscal consolidation.
Dr. Wampah said inflation expectations have heightened across consumers, businesses and the financial sector, which could have implications for pricing behaviour in the immediate outlook.
On growth, the Governor said challenges in the energy sector, fiscal consolidation and depreciation of the currency, as well as the current high cost of doing business, could weigh down on economic activity.
“Also, business sentiments have softened while consumer confidence, though up, remained subdued,” he said.
Dr. Wampah said external sector vulnerabilities also pose considerable risk to both inflation and growth.
“In particular, the fragile global financial conditions and continued commodity price volatility could adversely impact reserve accumulation.
“Also, the anticipated increase in US interest rates could lead to capital flow reversals.”
By Cephas Larbi
cephrok@yahoo.com
Via: -Daily Guide
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