Key rate down 1.0%

Bank Ghana’s key rate will fall by at least 1.0% to 13.50% by the end of the first half of this year, according to forecasts from Fitch Solutions, the research arm of the Fitch rating agency.

The international research organization has said that the reduction in the Bank of Ghana’s base lending rate is expected to come at the next Central Bank meeting in March 2020 or perhaps May 2020.

This should be triggered by even lower inflation and an improvement in the growth rate in the first quarter of this year.

In addition, he said that the continuity of government policy will lead to a steady upturn in sentiment among international and domestic investors, forcing the Bank of Ghana to cut its benchmark rate from 1.0% to 13.50%.

“The continuity of policies after the likely return of the New Patriotic Party government, which is largely pro-business, will result in a steady recovery in sentiment among international and domestic investors, the latter being helped by the BoG reducing its benchmark rate by 100 points. additional base to 13.50%, lowering borrowing costs for businesses ”.

This will further reduce borrowing costs for businesses and households.

Some analysts have also projected that the sharper-than-expected deceleration of inflation within the central bank’s target range is likely to strongly support a cut in policy rates at the next Monetary Policy Committee meeting, under February’s inflation reserve faces immediate risks from rising crude oil prices.

However, lower policy rates are needed to boost economic activity amid the second wave of covid-19 infections in the country.

In addition, the authorities are keen to reduce the government’s cost of borrowing as public debt increases. We have already seen some reduction in the cost of yielding treasury bills.

Policy rate maintained at 14.5%

The Bank of Ghana kept its policy rate – the rate at which it lends to commercial banks at 14.5%.

He cited the balance of risks to inflation and growth as the rationale for the unchanged policy rate.

“Short-term inflation risks are broadly contained, but short- and medium-term risks from fiscal expansion and rising crude oil prices are emerging.”

The unchanged policy rate means that the cost of lending will stay the same for at least the next two and a half months, unless some factors ease it slightly.

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