Prime News Ghana

Economist calls for reduction in Monetary Policy rate

By Justice Kofi Bimpeh
Dr Lord Mensah
Dr Lord Mensah
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Financial Economist and Senior Lecturer at the University of Ghana Business School, Dr. Lord Mensah says it will be prudent for the Bank of Ghana to reduce the Monetary Policy Rate.

According to the Economist, a reduction from the current 16% rate will improve the liquidity position in the country. 

The policy rate which determines the rate at which commercial banks borrow from the Central Bank has been kept at 16% for the past 12 months.

Speaking to Citi FM ahead of the first Monetary Policy Rate announcement for 2020 tomorrow, Friday, January 31, Dr. Lord Mensah said if the country wants to adopt an expansionary approach then there will be the need to reduce the policy rate.

He noted that the reduction will make it easy for people to have access to funds to carry out their activities.

READ ALSO: Policy rate kept at 16% by BoG 

"You want to adopt that kind expansionary approach where you will lower the rate for people to have access to funds through the financial system, as we've done the cleanup already in our medium of transmission of funds. So I'm expecting that the policy rate will be reduced and going into an election year I believe the policy committee will like to improve on the liquidity in our system if I say liquidity I mean access to funds, and funds exchanging hands from one point to the other, if you increase it you will not realise this mechanism of having funds throwing around. I believe that if anything at all it should be maintained or reduced..."

Monetary Policy Committee of the Bank of Ghana (BoG) in November last year kept the policy rate unchanged at 16 percent.

Speaking to the media, the Governor of the Bank of Ghana, Dr. Ernest Addison said the decision was a result of some threats to the country’s economic growth and inflation outlook.

Dr. Addison added that threats to inflation are broadly balanced hence the need to maintain the policy rate at 16 percent

This is the fifth time this year that the Bank of Ghana has kept its rate unchanged; since January this year.