BoG to decide fate of prime rate

The Monetary Policy Committee (MPC) of the Bank of Ghana will on Tuesday decide whether to keep or review the prime rate- the rate at which it does its lending to universal, commercial and merchant banks-when it presents the MPC report for the last quarter of the year.

During the last meeting in July this year, the Central Bank increased the prime rate from 16 percent to 17 percent, a decision that triggered increases in the base rate of commercial banks.

This also culminated in high lending rates for agriculture, manufacturing, construction and commerce.

However, some analysts suggest that the Bank of Ghana should review the prime rate downwards, to enable the private sector access funds at low rates from the financial intermediaries.

Recent developments, where inflation has dropped for the third month running to 17.89 percent after it neared 20 percent, and the slight stability of the cedi may be what some analysts would be basing their arguments on, for the MPC to consider slashing the prime rate.

Timelines of the prime rate decision is vital as analyses assert that it feeds into all money market and goods market rate, such as Treasury Bills, savings, lending exchange and inflation rates.

Also, with world crude oil prices currently at a six-month low- hovering around $65 per barrel last Friday, an expectation of an ease in the prime rate is high.

The Central Bank announcement will also advise the government on how to make changes in the prices of petroleum products, such as crude oil, which have eased significant lately.

Some of the country's economic indicators, such as the fiscal and trade deficits, the foreign exchange rates, and other financial factors which are expected to enhance the economic growth of the country, are also to be reviewed by the committee.

The MPC will also announce the evaluation of the monetary policy of the country and therefore make the necessary projections for the next quarter of the year. In addition, it will also assess the business risk factors.

Afterwards, it will announce the assessment and the projections for the next quarter of the year.

Source: Daily Guide