COVID-19: Bank of Ghana would reduce monetary policy rate again – EIU predicts

COVID-19: Bank of Ghana would reduce monetary policy rate again – EIU predicts

- The Bank of Ghana may soon reduce its monetary policy rate for the second time this year, the Economic Intelligence Unit (EIU) has predicted

-The economic effect of the outbreak of the coronavirus has been identified as the possible reason for the likely action

- The EIU has again predicted a likely rise in the rate of inflation but adds it may remain within BoG's target range

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The Economic Intelligence Unit (EIU) has predicted that the Bank of Ghana may further reduce the monetary policy rate.

This, the EIU believes, would be as a result of the economic implications of the outbreak of the coronavirus.

According to the EIU, Ghana’s average annual inflation is likely to rise slightly in 2020 but would remain within the Bank of Ghana’s (BoG) target range of 6-10%.

READ ALSO: Bank of Ghana advises financial institutions to avoid using liquid funds to buy Treasury Bills

The Unit noted that “reflecting on the ongoing currency weakness and upward pressure on the prices of some goods as a result of pandemic-related restrictions and shortages, annual average inflation is expected to edge up in 2020, to 8.7 percent (from 8.5 percent in 2019), despite a sharp downturn in economic activity.”

Per a report by Ghana Web, the EIU added that the decline in the hydrocarbons sector will have spillover effects on the wider Ghanaian economy, by negatively affecting industrial production, infrastructure investment and supplementary services. earlier reported that the Bank of Ghana’s Monetary Policy Committee (MPC) has reduced the policy rate to 14.5%.

The reduction is a 150 basis point reduction in the rate, which was initially 16% and remained unchanged for a long time.

The policy rate is the rate at which the Bank of Ghana lends to commercial banks; it also helps to determine the rate customers would pay on loans from banks.

READ ALSO: COVID-19: Bank of Ghana lists guidelines for banks and other financial institutions

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