BoG holds policy rate at 14.5% third time in a row

The Bank of Ghana (BoG) has maintained its Monetary Policy Rate (MPR) for the third consecutive time after reduction to 14.5% on the account of the COVID-19 pandemic in March.

Announcing the decision, the Governor of the BoG, Dr Ernest Addison, said the central bank took the decision after the Monetary Policy Committee’s view “that risks to the immediate outlook for inflation and growth are broadly balanced”.

In response to the economic impact of COVID-19 leading to a halt in business activities, BoG reduced the rate at which it lends to commercial banks in order to stimulate borrowing for business entities to finance their activities.

It was also aimed at increasing liquidity to address the demand for goods and services.

The downward adjustment of the monetary policy rate impacted the weighted average interbank lending rate, which declined to 13.6 per cent in August 2020 from 15.2 per cent in August 2019.

Average lending rates of banks have steadily declined to 21.4 per cent from 24.0 per cent over the same comparative period.

Inflation peaked sharply to 11.4 per cent in July 2020 but has since reduced to 10.5 per cent in August, as food prices reduce.

With the real Composite Index of Economic Activity (CIEA) seeking encouraging growth in May by 3.6 per cent in July 2020, compared with a contraction of 10.6 per cent recorded, the BoG has held on to the previous rate.

“Consumer spending, industrial consumption of electricity, and construction activities have all reached pre-lockdown levels, while tourist arrivals and port harbour activity are gradually edging upwards. In contrast, imports, exports, and private sector contributions to social security remain below pre-lockdown levels,” the BoG stated.

The last time BoG pegged its MPR at 14.5% was in January 2006.