Skip to main content

Policy rate hits 27%; loans to become more expensive


 The Bank of Ghana has increased its policy rate by 2.5 percentage points to 27%, citing risks to inflation and exchange rate concerns as reasons.

This means cost of borrowing is expected to go up further but will depend on the risk profile of the customer. Customers who are credit worthy may enjoy a slightly better rate than first time borrowers or customers are who are considered somehow risky.

The inflation forecast shows that in the outlook, inflation will likely peak in the first quarter of 2023 and settle at around 25% by the end of 2023. This forecast is conditioned on the continued maintenance of tight monetary policy stance and the deployment of tools to contain excess liquidity in the economy. There are however some risks to this forecast that would have to be monitored, including additional pressures from the proposed VAT increase, and exchange rate pressures. Continued vigilance to the evolution of these potential price pressures in the outlook will be key”, Dr. Ernest Addison, Governor of the Bank of Ghana stated”.

He added “the Committee is of the view that significant upside risks to the inflation outlook remain. To continue to anchor inflation expectations, the Committee therefore decided to increase the policy rate by 250 basis points to 27.0%”.

Following the increase in the policy rate, consumer spending is expected to decline.

Already, average lending rate is 31.40%.

However, the average lending rate varies among the banks and the respective sectors that they lend to.

Some banks will offer loans equivalent to the Ghana Reference Rate of 27.44%, whilst others will charge rates as high as 40%.

Interest rates trend upwards

Interest rates on the money markets trended upwards across the spectrum of the yield curve, in line with the tightening of monetary policy stance.

At the short-end of the market, the 91-day and 182-day Treasury bill rates increased to 31.53% and 32.61% respectively, in October 2022, from 12.46% and 13.16% respectively, in the same period of 2021. Similarly, the rate on the 364-day bill increased to 32.32%, from 16.24% over the review period.

On the secondary market, rates on all bonds, from 2-year through to 20-years, almost doubled over the one-year review period

Labels:

Comments

Post a Comment

Popular posts from this blog

Fitch Solutions retains 2025 growth rate projection at 4.2%

 Fitch Solutions has reaffirmed its projection that Ghana’s economy will expand by 4.2% in 2025. This estimate slightly exceeds the International Monetary Fund’s forecast of 4% and the World Bank’s projection of 3.9%. The UK-based research firm attributes its outlook to historically high gold prices, which are expected to cushion the Ghanaian economy against a global slowdown triggered by rising tariffs. Higher gold prices are anticipated to strengthen government revenue, enhance foreign exchange earnings, and help sustain currency stability. The report also highlights that Ghana is relatively less vulnerable to increasing trade restrictions from the United States, given that its primary exports—gold and crude oil—are not directly affected by the tariffs introduced by President Trump’s administration. Moreover, the US constitutes only about 4% to 5% of Ghana’s total exports. In contrast, Ghana’s trade relations are more heavily oriented toward China and European countries, particul...
Post a Comment
Read more

BoG injects $20m into FX market to support 11 BDCs

  The Bank of Ghana (BoG) has injected $20 million into the foreign exchange market in the latest round of its forward FX auction targeted at Bulk Oil Distribution Companies (BDCs). The intervention, which benefited eleven BDCs, is part of the central bank’s broader strategy to stabilise the cedi and ensure price stability in the petroleum downstream sector. Held on Tuesday, April 29, the auction was priced at a locked exchange rate of GHS 14.28 to the US dollar, with bid offers ranging from GHS 13.85 to GHS 15.55. This move reflects the BoG’s continued effort to deepen forex liquidity and safeguard the domestic fuel supply chain against volatility in global energy markets. By directly supplying FX to BDCs, the central bank seeks to ease pressure on the interbank market, guarantee the uninterrupted flow of petroleum products, and mitigate the pass-through effects of exchange rate fluctuations on fuel prices. The $20 million disbursement forms part of a $120 million programme for th...
Post a Comment
Read more

Kenpong Travel & Tours Champions Breast Cancer Awareness During Customer Week

  As part of activities to mark Customer Week, Kenpong Travel & Tours, a leading travel agency in Ghana, is joining the global fight against breast cancer. October is Breast Cancer Awareness Month, and the company is passionate about spreading hope and support to those affected. At Kenpong Travel & Tours, we believe that travel and exploration can be therapeutic and empowering. That's why we're committed to supporting our customers and the broader community in the fight against breast cancer. We're proud to stand in solidarity with breast cancer warriors and survivors. At Kenpong Travel & Tours, we believe that everyone deserves a chance to explore the world and create unforgettable memories. Let's prioritize health, support one another, and fight against breast cancer," said Kennedy Agyapong, CEO of Kenpong Travel & Tours. Our efforts are focused on raising awareness, promoting early detection, and supporting those affected by breast cancer. We urg...
Post a Comment
Read more