By Kofi AHOVI
The Bank of Ghana (BoG) is likely to maintain its policy rate at 13.5% making it the fifth consecutive time that the central bank has maintained the rate at that level.
The Monetary Policy Committee (MPC) of BoG will commence its 44th regular meeting today Monday, May 9, 2011 to review developments in the economy.
The meeting will end with a decision on the appropriate positioning of the Bank’s policy rate, the Monetary Policy Rate, which would serve as the benchmark for universal banks in the country in setting their respective base lending rates. The MPC will hold a press conference on Friday, May 13, 2011 to announce its decision.
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. Traditionally, the banks tend to either up or down their base rates in response to signals sent by the BoG through this rate.
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 impovement in the overall quality of banks loan portfolio.
Ghana Commercial Bank (GCB), Stanbic Bank, Bank of Baroda all reduced their base rates to 20.50% from 21.5%, 21.95% from 23.95% and 21.75% from 23.00% respectively. UT bank has also reduced its average lending rate to 25.95% from 26.90%. The average reduction in the base lending rates was 1.55%.
BoG maintained its policy rate the last time it met early 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 quarter 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 March to 9.13% from 9.16% in February this year, as the central bank continues a tight monetary policy, coupled with a deflationary fiscal policy regime of the government.
Interest rates on money market instruments have been on the low side in historical terms for sometime hovering around 12.05% for 91-Day Treasury Bill down from twice this during the first half of 2009. Interest rate for the 182- day Treasury Bill is 12.45% while the one year Treasury note attracts 12.48%.
The Bank of Ghana (BoG) is likely to maintain its policy rate at 13.5% making it the fifth consecutive time that the central bank has maintained the rate at that level.
The Monetary Policy Committee (MPC) of BoG will commence its 44th regular meeting today Monday, May 9, 2011 to review developments in the economy.
The meeting will end with a decision on the appropriate positioning of the Bank’s policy rate, the Monetary Policy Rate, which would serve as the benchmark for universal banks in the country in setting their respective base lending rates. The MPC will hold a press conference on Friday, May 13, 2011 to announce its decision.
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. Traditionally, the banks tend to either up or down their base rates in response to signals sent by the BoG through this rate.
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 impovement in the overall quality of banks loan portfolio.
Ghana Commercial Bank (GCB), Stanbic Bank, Bank of Baroda all reduced their base rates to 20.50% from 21.5%, 21.95% from 23.95% and 21.75% from 23.00% respectively. UT bank has also reduced its average lending rate to 25.95% from 26.90%. The average reduction in the base lending rates was 1.55%.
BoG maintained its policy rate the last time it met early 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 quarter 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 March to 9.13% from 9.16% in February this year, as the central bank continues a tight monetary policy, coupled with a deflationary fiscal policy regime of the government.
Interest rates on money market instruments have been on the low side in historical terms for sometime hovering around 12.05% for 91-Day Treasury Bill down from twice this during the first half of 2009. Interest rate for the 182- day Treasury Bill is 12.45% while the one year Treasury note attracts 12.48%.
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