Financial Economist, Prof Lord Mensah is hopeful that the Bank of Ghana will increase the Monetary Policy Rate (MPR) again to boost investor confidence in the country.
His call comes ahead of the announcement of a new or maintained policy rate on September 27.
The Bank of Ghana in an emergency meeting last month hiked the monetary policy rate by 300 basis points to 22% due to the current economic crisis.
Prof Mensah believes the rate will be increased again since the country is not out of the woods especially with inflation.
“The MPC will definitely increase the Monetary Policy Rate because until they increase it to the level where the rate will match up with inflation, investor confidence will go down. Now investors have no confidence in our economy because if you invest and you’re getting an average of 27% and inflation is around 31%, the real rate on your investment is negative. So the rate needs to be at par with inflation too boost confidence.”
He continued, “When the MPC increases the rate, it’s definitely going to feed into interest rate structures and as a result, private sector access to finance will be low. But for now, we may have to sacrifice that one so when the confidence has been stabilized, then the policy rate can be reduced.”
Already, ratings agency Fitch has predicted that the BoG will continue to hike the MPR to about 24% by the end of 2022.
According to the agency, the projection is based on elevated inflation which is driven by the rapid depreciation of the Ghana Cedi against major trading currencies which will peak in the final quarter of 2022.
Fitch also pointed out the Central Bank would further tighten the monetary rate on the condition of a possible economic bailout from the International Monetary Fund which could be secured in 2023.
Due to this, it predicted that the BoG will hike the benchmark interest rate by some 3 percentage points to 27 percent in 2023.