Some analysts are forecasting that the Monetary Policy Committee (MPC) of the Bank of Ghana’s, will maintain the policy rate at 14.5 percent, for a record seventh consecutive time since it was slashed amidst the pandemic last year.
The analysts who spoke to Business24 argue that the central bank’s decision is likely to be motivated by the increased possibility of inflation shooting up again despite the sharp decline recorded in April 2021.
April’s Inflation declined by 1.8 percent — back into the central bank’s medium target of between 8 to 10 percent — to 8.5 percent from 10.3 percent the previous month.
Courage Kingsley Martey, Senior Economist with Databank Research, stated that: “The good news is that headline inflation dropped sharply to 8.5% in April 2021 and well within the BOG’s target range of 6% to 10%. This has eased the pressure on the committee if there’s ever the need to consider a hike in the policy rate.”
“We expect the policy rate to be maintained at 14.5%,” Martey added.
However, noting the possible risk to a rise in inflation, the senior economist said, “there’s an emerging threat to inflation coming from cost factors, reflected in a consistent rise in non-food inflation which hit 10.2% in April. And this is higher than the pre-pandemic level in March-2020.”
Also, Chief Executive Officer of Republic Securities, Kow Akyen Sackey told Business24 that given the government’s position on maintaining lower rates, policy rate is most likely to be kept unchanged at 14.5 percent.
“The Bank seems bent on maintaining rates at where they were. This evidenced by recent issuances on the primary bonds market,” he said.
Professor of Economics at the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, like the other analysts, also projected that the policy rate will most likely remain unchanged since developments within the economy in the last couple of months, do not support a reduction in the base lending rate.
“Looking at the fundamentals and judging from the way the exchange rate has been relatively stable, inflation is likely to inch up marginally and I don’t see much overheating in the economy. My expectation is that the policy rate will be maintained again”.