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 Wednesday 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 50 basis points from 13% to12.5% in July this year but base lending rate
The policy rate is the rate at which the central bank does overnight lending to universal banks and serves as a basis for the banks in setting their respective base lending rates, as well as lending to their most favoured customers.
Some analysts that BUSINESSWEEK spoke to were of the view that the central bank would maintain the policy rate at the current level to reflect the recent events in the banking sector and the economy at large.
Universal banks in the country have recently reduced their base rates to reflect economic conditions and changes in the banking sector.
The recent base rate reductions reflect the banks assessment that lending risks are on the decline because of increased liquidity in the economy, following governments payment of substantial arrears owed to contractors and an improvement in the overall quality of banks loan portfolio.
Despite the reduction in BoG’s policy rate, base lending rates for banks are still high at about 25%, 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 eight months of this year including the country’s fiscal and trade deficits, how those deficits are improving or worsening, the inflationary trend based on the central bank’s own economic models and the appreciation or depreciation of the cedi against the major international trading currencies, as well as the government’s plans to strengthen it.
Inflation decreased slightly in July to 8.39% from 8.59% in June this year, as the central bank continues a tight monetary policy, coupled with a deflationary fiscal policy regime of the government.
Interest rates on the money market have continued to decline, since the beginning of the year. The 91-day Treasury bill rate declined from 12.3% to 10.6%, while the 182-day Treasury bill rate declined from 12.7% to 11.4% Between January and June 2011.
The rate on the 1-year note fell from 12.7% to 12%, while the 2-year fixed rate note also dropped from 12.7% to 12.1%. During the same period, the overnight interbank rate, the rate at which commercial banks borrow from each other, declined by 3 bps to 11.6%.
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 Wednesday 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 50 basis points from 13% to12.5% in July this year but base lending rate
The policy rate is the rate at which the central bank does overnight lending to universal banks and serves as a basis for the banks in setting their respective base lending rates, as well as lending to their most favoured customers.
Some analysts that BUSINESSWEEK spoke to were of the view that the central bank would maintain the policy rate at the current level to reflect the recent events in the banking sector and the economy at large.
Universal banks in the country have recently reduced their base rates to reflect economic conditions and changes in the banking sector.
The recent base rate reductions reflect the banks assessment that lending risks are on the decline because of increased liquidity in the economy, following governments payment of substantial arrears owed to contractors and an improvement in the overall quality of banks loan portfolio.
Despite the reduction in BoG’s policy rate, base lending rates for banks are still high at about 25%, 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 eight months of this year including the country’s fiscal and trade deficits, how those deficits are improving or worsening, the inflationary trend based on the central bank’s own economic models and the appreciation or depreciation of the cedi against the major international trading currencies, as well as the government’s plans to strengthen it.
Inflation decreased slightly in July to 8.39% from 8.59% in June this year, as the central bank continues a tight monetary policy, coupled with a deflationary fiscal policy regime of the government.
Interest rates on the money market have continued to decline, since the beginning of the year. The 91-day Treasury bill rate declined from 12.3% to 10.6%, while the 182-day Treasury bill rate declined from 12.7% to 11.4% Between January and June 2011.
The rate on the 1-year note fell from 12.7% to 12%, while the 2-year fixed rate note also dropped from 12.7% to 12.1%. During the same period, the overnight interbank rate, the rate at which commercial banks borrow from each other, declined by 3 bps to 11.6%.
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