The Chief Executive Officer of Dalex Finance, Ken Thompson, has lauded the Bank of Ghana for keeping the monetary policy rate unchanged for the fourth consecutive time.
According to him, the current economic indicators like high risk of inflation and the country’s debt levels do not support a reduction in policy rate.
Speaking to Citi Business News, the CEO of Dalex Finance Ken Thompson said the BOG monetary policy committee did the right thing to have maintained the rate.
“I am really not sure of the argument by people who are opposing the decision but I think the governor made the right decision. Inflation as it is now is not necessarily coming down and so this is not the time to be reducing the policy rate because that will give the wrong signals to the market,”
Ken Thompson’s comments follow concerns by some analysts and business groups that the base lending rate is still high hence its impact on business operations.
He further explains that though inflation may be declining, the Bank of Ghana has no control over the cost push components.
“In any case what we forget is that the things that cause inflation, food and utility prices the governor has no control over them. So he hopes that those prices will stabilize and then comes down, and then he can start to reduce the policy rate.”
A Senior Lecturer of Finance at the University of Ghana Business School, Dr. Lord Mensah has expressed surprise at the Bank of Ghana’s decision to maintain the policy rate at 26%.
According to him, macroeconomic indicators such as the decline in inflation should have reflected in a drop in the policy rate.
“I think it is a surprise, with the maintenance of the policy rate. There is some kind of uncertainty around it as one is not sure when the rate will come down or move up. But for me looking at all the indicators on the ground, if you are really abreast with all that is happening on our macro-economic front, then I presume the rate should have come down,” he remarked.
He was however of the opinion that the central bank may have maintained the rate due to low liquidity.
Governor justifies maintaining policy rate at 26%
Meanwhile the governor of the Bank of Ghana, Dr. Abdul Nashir Issahaku has justified why the Monetary Policy Committee kept the policy rate at 26%, unchanged.
He argued that increases in ex-pump prices of petroleum products continue to impede the central bank’s disinflation process.
Reacting to expectations that the policy rate should have rather been reduced considering the stability in the economy, Dr. Issahaku said it is too early to reduce the policy rate considering inflation which currently stands at 18.4%.
Though the Governor in May this year was optimistic of achieving the BoG’s inflation target of 8 percent plus or minus 2 by close of year, he expressed concerns over risks such as petroleum price hikes and utility price hikes.
By: Norvan Acquah – Hayford/citibusinessnews.com/Ghana