BoG To Keep Policy Rate Unchanged

THE Bank of Ghana (BoG) is expected to keep its policy rate of 17.0 percent unchanged at least for now because of some shocks on the economy.

There had been expectations of about 50 basis points (0.50 percent) cut in the benchmark interest rate when the Monetary Policy Committee (MPC) concludes its review of the Ghanaian economy on Friday 20 July, 2017 and make projections for the next quarter of 2018.

But some analysts and research outfits want the policy rate to remain unchanged for now.

“On the back of recent weak financial market sentiment and offshore selloffs in the local fixed income market, we expect the BoG to temporarily suspend its monetary easing campaign to ease pressures on the GHS”, Ecobank Research opined, turning away from its earlier projection of a further cut in the policy.

Financial portal also expects the policy rate to remain same for now because of slight increase inflation and exchange rate fluctuation.

BMI Research had earlier projected that the policy rate will end the year 2018 at 16.0 percent, driving cost of borrowing further down and boosting private sector growth.

BMI emphasized that “With inflation falling to a four-year low within the BoG's 6.0 percent to 10.0 percent target in April, this leads us to expect the BoG to continue easing, albeit at a more moderate pace amid robust real GDP growth.”

Ecobank Research has also predicted an expectation of a further cut in the policy rate when the MPC meets in July 2018.

The MPC meeting will look at the macroeconomic targets that government has missed and its impact on the economy. They are expected to proffer solutions that are expected to be business friendly and boost consumer confidence.

In May 2018, the MPC noted that the risks to the inflation outlook were subdued in the forecast horizon, adding “while global and domestic developments do not yet pose a threat to inflation in the near term, recent changes in global financing conditions and its impact on emerging market asset classes requires some vigilance.”

Meanwhile, money market interest rates have remained largely unchanged between April 2018 and June 2018continued to ease. In April 2018, rates on the 91-day Treasury bill instrument declined to 13.3 percent from 16.5 percent a year ago.

Similarly, the 182-day instrument declined to 13.9 percent from 16.8 percent, while the 1-year note also dropped to 15.0 percent from 18.3 percent over the same comparative periods.

The 91-day Treasury bill instrument is presently going for 13.31 percent while the 182-day T bill is going for 13.86 percent. The 1-year note is however going for 14.50 percent.