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Economist lauds policy rate reduction

Economist, Dr. Eric Osei Assibey has described the move by the Bank of Ghana (BoG) to reduce the policy rate by 100 bases point from 21 percent to 20 percent as a positive development.

The Central Bank on Monday (27th November, 2017) reduced the policy rate from 21 percent to 20 percent.

This was announced after the Monetary Policy Committee (MPC) finished its 79th meeting which is the final for 2017.

This is the fourth reduction for this year by the Central Bank.

The policy rate is the rate at which the central bank lends to commercial banks in the country.

By this, it is used to determine the cost at which banks can borrow from the regulator.

In an interview with Citi Business News Economist and Senior Lecturer at the University of Ghana Dr. Eric Osei Assibey said the reduction will stimulate economic growth.

“I think it is very much ok and I think it is a very positive development. We are all looking at how the monetary policy rate could be done to march the declining rate and also to bring other interest rate down to the average trend.

Mind you it has not been all that stable also given the fact that the external market conditions has also not been stable, fallen cocoa prices among others. All of that were taken into consideration in deciding the percentage that it should fall” he said.

He was however of the view that the committee can now observe the impact as before any move is made to further reduce the rate.

He stated for example that a further reduction may affect returns on government investments, particularly in the financial sector.

“If they reduce too much it can also have a negative impact on the economy in that the returns on government’s yields and domestic access will not be that attractive to investors”.

By: Jessica Ayorkor Aryee/citibusinessnews.com/Ghana

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