![Policy Rate Drops To 29%](https://dailyguidenetwork.com/wp-content/uploads/2023/09/Dr-Ernest-Addison-445x406.jpg)
Dr. Ernest Addison
The Monetary Policy Committee (MPC), of the Bank of Ghana has dropped its lending rate from 30% to 29% following a decline in inflation.
The Governor of the Bank of Ghana, Dr. Ernest Addison who announced this at the 116th meeting said the decision was due to a sharp decline in inflation from a peak of 54.1 % at the end of December, 2022 to 23.2 % in December 2023.
He said, “The disinflationary process which began earlier in the year continued to the last quarter of the year supported by strong policies, relative exchange rate stability, and effective liquidity sterilisation efforts.”
“The volatilities that characterised the foreign exchange market in January 2023 dissipated and the Ghana cedi remained relatively stable throughout the rest of the year. The stability in the foreign exchange market hinged on improved inflows from the IMF ECF first tranche, the domestic gold purchase programme remittances and FX purchases from mining and oil companies amid monetary tightening”.
He maintained that the macroeconomic fundamentals have all trended in the right direction with both headline and core inflation declining and projected to decelerate further.
The MPC stated that the headline inflation which declined by 30 percentage points in the course of 2023 could be attributed to factors that have supported the disinflationary process.
That, he mentioned, include tightening monetary policy stance throughout 2023, favourable international crude oil prices which led to stable ex-pump prices, transportation costs and relative stability in the exchange rate.
Dr. Addison also indicated that one of the key considerations for a reduction in the lending rate was the global economic activities in 2023, improving in the first half year but moderated in the second half with mixed performances.
“On one hand, reflecting a strong growth in the United States amid solid domestic demand and resilient labour markets tighter financing conditions,” he added.
On the money market, he mentioned that interest rates broadly trended downward citing the 91 day and 182 day treasury bill rates decreasing to 29.49 percent and 31.70 percent respectively.
Banking Sector Outlook
On the banking sector, the MPC observed that the banking sector remains stable despite the elevated credit risks with an improvement in the liquidity and profitability after the domestic debt restructuring.
It said it is closely monitoring the capital restoration efforts in line with approved plans including support from the Ghana Financial Stability Fund.
MPC emphasised the need to maintain a strong policy stance to consolidate the disinflationary gains given the emerging recovery.
By Ebenezer Amponsah
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