The Bank of Ghana (BoG) has reduced the Policy Rate by 100 basis point, indicating a drop in the rate from 23.5 percent to 22.5 percent.
The figure was announced by the Governor, Dr. Ernest Addison after supervising his maiden Monetary Policy Committee(MPC) meeting, following his appointment to the central bank in March.
Before this, the former governor, Dr. Abdul Nashiru Issahaku announced a 200 basis point reduction from of 25.5 percent to 23.5 percent in March. This is the second time in this year that the central bank has reduced the Policy Rate.
Addressing journalists at the Bank of Ghana, Dr. Addison cited the stable inflation among others as reasons for the reducing the policy rate.
He added that the downsize risk is lower compared to high size risks in relation to the stability of the cedi.
“There are indications that growth is likely to remain significantly stable, alongside an improved inflation outlook, provides some scope for monetary policy easing,” he said.
“On inflation, the Committee noted that headline inflation, and inflation expectations have broadly trended downwards.The disinflation process has been supported by tight policy stance and exchange rate stability,” he added.
Dr. Addison pointed out that with the stable outlook for exchange rate movements and the return to the path of fiscal consolidation, headline inflation is expected to trend towards the medium-term target in 2018, barring any unanticipated shocks.
The policy rate is the rate at which commercial banks borrow from the central bank for onward lending to their customers.