Reducing interest rates: Economist hopeful of banks’ response

Business News of Thursday, 27 July 2017



High Interest Rates22There have been concerns over why interest rates on loans for instance are still high

Some economists are predicting that commercial banks across the country will soon reduce their interest rates.

Figures from the Bank of Ghana (BoG) show that the 91 day Treasury bill is at 12.5 percent while that of 182 days is at 12.9 percent.

Following the decline, there have been concerns over why interest rates on loans for instance are still high.

But the banks have argued that the T-Bills only account for a slight percentage of the indicators used in calculating the rates.

Commenting on the development, Economist, Professor Robert Darko Osei said he is hopeful banks will reduce their rates soon especially as most key indicators are declining.

“Interest rate which is a derivative of the fiscal challenges is generally high although it has shown signs of declining. At least the T-bill rates are declining and again people are concerned that the banks are not responding. I feel we should just relax because they will respond soon. It is a matter of time. It has to be sustained,” he stated.

Professor Osei was speaking at the 2nd Pentvars Business Journal public lecture organized by the Pentecost University College.

He added, “The banks have to be assured that government’s borrowing is actually on the decline so that there is no sort of easy avenues for them to make money. Now when that happens, the forces of demand and supply will drive interest rates down.”

The Governor of the Bank of Ghana, Dr. Ernest Addison is also hopeful banks in the country will eventually reduce their interest rates as inflation declines.

Currently, inflation is at 12.1 percent as the policy rate stands at 21 percent.

The Governor stressed that with time, the banks will decrease the interest rates as inflation declines.

Meanwhile, investors have begun ditching treasury bills and now exploring other investment instruments in the country over the continuous significant decline in TBill rates in the country.

Treasury bills are nonetheless, one of the most patronized investment instruments by most investors in Ghana.

The lecture was on the theme “Ghana’s Development Agenda-is the 2017 Budget a formula for success?”

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