Local and Foreign Economic Experts Project Maintenance in BoG’s Policy Rate Announcement Today
Both local and foreign economic experts are anticipating a continuation in the pause of the Bank of Ghana’s (BoG) monetary policy rate set to be announced today by the new Governor, Dr Johnson Asiama.
According to Reuters a poll of foreign economic analysts on Thursday, March 27, indicates a cautionary stance by policymakers on the back of a challenging inflationary environment.
The Bank of Ghana (BOG) has cut rates by 300 bps since last year and the survey suggested rates would be cut 100 bps to 26% in May with another cut of 125 bps to 24.75% in the third quarter. The key rate was seen ending the year at 23%.
All but one of 10 analysts surveyed between March 20 and 26 expected the BOG to keep rates steady at its monetary policy meeting on Monday.
“In Ghana, we believe that inflation hovering well above target and recent FX weakness will lead the BOG to hold rates at 27%,” wrote Kevin Daly, managing director and senior economist at Goldman Sachs.
“That said, given the BOG’s history of premature monetary easing, the possibility of a cut cannot be completely ruled out,” he added.
Views on the continuation of a pause on the monetary policy rate is also shared by Dr Richmond Atuahene, an economic expert and banking consultant in the country.
Also making reference to the currently high inflationary environment, Dr Atuahene has advised the Governor of the Bank of Ghana (BoG), Dr. Johnson Asiama, to maintain the policy rate at its current level of 27% warning against a premature reduction in the policy rate.
“If you look at the policy rate and inflation expectations, the expectation is very high, the macroeconomic environment is not as good as people think. Any country experiencing over 20% inflation consistently for a year is considered to be in a state of hyperinflation,” he noted.
He further cautioned that lowering the policy rate without ensuring stable inflation and currency conditions could lead to a loss of control over inflation.
“The governor must be very circumspect about bringing the rate down simply because Treasury bill rates have declined,” he stated. “If he does so prematurely, inflation could spiral out of control.”
The Bank of Ghana’s Monetary Policy Committee (MPC) is expected to announce its new policy rate decision today.
