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Economist predicts policy rate will be maintained at 16 percent

Economist Professor Peter Quartey is of view that the Monetary Policy committee is likely to maintain the figure at 16 percent. He argues that the committee will take the decision to help sustain price stability.

The Monetary Policy Committee of the Bank of Ghana is on its regular meetings to assess the strength of Ghana’s economy.

The MPC started the meetings yesterday and it is expected to announce the policy rate decision tomorrow.

The committee is chaired by the Governor of the Bank of Ghana, Dr. Ernest Addison, and amongst the issues that they are to consider may include the country’s debt situation, developments in the banking sector as well as the cedi’s depreciation.

At the last MPC meeting in May, the policy rate which is the rate at which the Bank of Ghana lends to commercial banks was maintained at 16 percent.

Governor Dr. Addison explained that the decision was in line with efforts aimed at keeping inflationary pressures under control to achieve price stability.

But speaking ahead of the policy rate announcement on Friday, Economist Professor Peter Quartey said a reduction could distort inflationary trends seen over the months.

“A reduction could have some repercussions, so for me at this point, looking at the macro fundamentals, it is better it is maintained in the sense that if you look at the inflation rate it is quite within range.

You look at the cedi having depreciated significantly, economic growth remains good, inflation outlook remains very good. Our fiscal deficit also remains on course. So for me, I think it is better to maintain than to increase.

But the reduction, it could be reduced but it is not the best option because then it might trigger capital because we have foreigners who also own some of these domestic bonds and the rest so reduction may not be in their interest,” he said.

The Monetary Policy Committee of the Bank of Ghana had earlier scheduled to announce its policy rate on Monday July 22,2019.

According to a notice sent to journalists, the change has been necessitated by the fact that the Minister of Finance will be presenting its mid-year budget statement to Parliament on Monday.