Economists in the country have said they expect the Monetary Policy Committee (MPC) of the Central Bank to maintain its current policy rate of 14.5 per cent.
The call by economists for the current policy rate to be maintained by the MPC, comes on the back of the country’s high fiscal deficits and some lingering external risks.
Speaking to norvanreports, Courage Martey, an economist with Databank, noted that the best decision for the MPC would be to maintain the current policy rate while remaining vigilant.
According to him, the country’s fiscal deficit projected to be 11.4 per cent at the end of this year shows a fiscal risk outlook which cannot be reduced, adding that reductions in inflation for the last two months however, gives the hope that there will not be an increase in the policy rate.
“Let’s consider the fact that fiscal risk is quite high and despite reductions in inflation fiscal risk has not been moderated because Government has a high borrowing and financing requirement which regiuires a certain level of interest rate to attract the needed funds to finance Government’s deficits. So on the argument of inflation and fiscal deficits I would say the policy rate needs to be maintained,” he stated.
Should the MPC maintain the current policy rate, it would be the fourth consecutive time it has done so.
The MPC today, November 18, 2020, commences its 97th MPC meeting.
The Committee chaired by the Governor of the Central Bank, Dr Ernest Addison, will be reviewing developments in the economy in the last 2 months.
The Committee after its review of the economy is expected to come out with a new policy rate to be announced on Monday, November 23.
The policy rate by the MPC is the interest rate at which the Central Bank lends to commercial banks which forms the benchmark for interest rates on loans by commercial banks to the public.