By Kofi Ahovi
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) would from today begin meeting to review the health of the economy.
It is expected to announce a new policy rate this Friday which would serve as the benchmark for universal banks in the country in setting their respective base lending rates.
The policy rate is the rate at which the central bank does overnight lending to universal banks in the country. It serves as a basis for the banks in setting their respective base lending rates, as well as lend to their most favoured customers.
BoG cut its policy rate by 100 basis points from 16% to15% in April this year but base lending rates for banks are still high at about 29%, and banks are insisting on wide spreads between their base rates and their actual lending rates to compensate for perceived high credit risk in the face of rising loan repayment defaults.
The BoG governor, Kwesi Amissah-Arthur, who would present the committee’s report, is expected to give comprehensive details of macro-economic performance for the first five months of the year including the country’s fiscal deficit, how the deficit is improving or worsening, the inflationary trend based on the central bank’s own economic models and the depreciation of the cedi against the major currencies, as well as the government’s plans to strengthen it.
Inflation dropped for the 11th consecutive months to 10.68% in May this year, as the central bank has adopted a tight monetary policy, coupled with a deflationary fiscal policy regime of the government.
However, inflation is expected to rise in the coming months due to implementation of new utility tariffs and the Single Spine Salary Structure, among others.
Conversely, petroleum product prices are expected to be reduced imminently and so this very important factor is unlikely, to have a cost-push effect on inflation, at least in the short term. Crude oil price on the international market is hovering around US$72.
Interest rates on money market instruments have been on the low side for sometime hovering around 12.98% for 91-Day Treasury Bill down from twice this during the first half of 2009.
The currency has remained relatively stable over the past few months though it depreciated against the dollar recently. The committee is expected to adopt a policy that would continue its preservation.
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) would from today begin meeting to review the health of the economy.
It is expected to announce a new policy rate this Friday which would serve as the benchmark for universal banks in the country in setting their respective base lending rates.
The policy rate is the rate at which the central bank does overnight lending to universal banks in the country. It serves as a basis for the banks in setting their respective base lending rates, as well as lend to their most favoured customers.
BoG cut its policy rate by 100 basis points from 16% to15% in April this year but base lending rates for banks are still high at about 29%, and banks are insisting on wide spreads between their base rates and their actual lending rates to compensate for perceived high credit risk in the face of rising loan repayment defaults.
The BoG governor, Kwesi Amissah-Arthur, who would present the committee’s report, is expected to give comprehensive details of macro-economic performance for the first five months of the year including the country’s fiscal deficit, how the deficit is improving or worsening, the inflationary trend based on the central bank’s own economic models and the depreciation of the cedi against the major currencies, as well as the government’s plans to strengthen it.
Inflation dropped for the 11th consecutive months to 10.68% in May this year, as the central bank has adopted a tight monetary policy, coupled with a deflationary fiscal policy regime of the government.
However, inflation is expected to rise in the coming months due to implementation of new utility tariffs and the Single Spine Salary Structure, among others.
Conversely, petroleum product prices are expected to be reduced imminently and so this very important factor is unlikely, to have a cost-push effect on inflation, at least in the short term. Crude oil price on the international market is hovering around US$72.
Interest rates on money market instruments have been on the low side for sometime hovering around 12.98% for 91-Day Treasury Bill down from twice this during the first half of 2009.
The currency has remained relatively stable over the past few months though it depreciated against the dollar recently. The committee is expected to adopt a policy that would continue its preservation.
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