Business News of Thursday, 25 October 2018
The Governor of the Bank of Ghana, Dr. Ernest Addison has disclosed that interest rates will drop further when external pressures on the economy decline.
The central bank has kept its policy rate unchanged at 17 percent, for two consecutive times this year.
The move is anticipated to increase access to capital by businesses as commercial banks are expected to review interest rates downwards.
Speaking to Bloomberg, Dr. Ernest Addison said the gains made by the government over the past two years contributed to the decision to cut the policy rate from 25.5 percent to 17 percent.
But he says the trigger by the US Fed’s decision to increase interest rates, impacted emerging economies like Ghana which has prompted the decision to keep the rate unchanged.
The Governor however suggests that the rates may be adjusted when the external pressures equally subside.
“We had made some gains until May when the emerging markets issues started and then we started seeing additional currency depreciation losing almost 7 percent in September,” he stated.
Commenting on the potential risk to the inflation targeting regime, Dr. Addison admitted to possible increases soon.
He however maintains that the increase may not significantly move the central bank away from its target of 8 percent, plus or minus 2.
He added: “We have an automatic prices mechanism for petroleum in the country so you see that petroleum prices and transport fares have gone up so you see that there are threats where inflation would have to be but we are not looking at a major departure from our targets.”
Again, the Governor assures that his outfit is working to reduce the impact of investor sentiments on the cedi’s performance especially when they participate in local bonds issued.
“The appetite is still there and once a while we see the contagion effect in terms of sentiments and few outflows but that tend to be short-lived. This has obviously it has an impact on the currency when investors have the sudden interest in exiting the market but we have managed that well so we should be okay.”