Pulse.com.gh logo

Cost of Borrowing: World Bank backs a monetary policy hike

The possibility of an increase is not really seating well with some banking sector players who believes that a further hike in the policy rate will further increase the cost of borrowing in the country.

  • Published: , Refreshed:

The IMF has backed a possible increase in the Bank of Ghana's monetary policy rate later Monday morning.

Analysts say the rate is likely to inch up further from an already record- high of 26%. The IMF believes a higher monetary policy rate will help check demand side inflation.

The possibility of an increase is not really seating well with some banking sector players who believes that a further hike in the policy rate will further increase the cost of borrowing in the country.

Presently the policy rate sites at a 25-year record high of 26%. This however, is a merger of the monetary policy rate and the reverse-repo rate.

The monetary policy rate is the base rate from with commercial banks peg their interest rates, whereas the reverse- repo rate is the commercial rate at which the Bank of Ghana lends to banks as determined by the demand and supply of funds and other market forces at  the particular time.

Meanwhile, Economist and Financial analyst at Economic Policy Think tank, Afrinvers PLC, Patrick Stephenson believes  With inflationary pressures still persistent, and gradual adjustment of the economy to the recent hikes in utility, petroleum and income taxes, together with the extraneous challenges the economy will face in 2016, it is likely that the monetary policy authority will in its next decision increase of maintain the policy stance.

 However, the recent antecedents in its decisions will suggest that this will be less desirable as it will not deliver the results the authorities will be pursuing. At this point the monetary authority has to balance the objective of growth recovery against price stability and given the inability of the recent hikes to aggressively ‘catch’ inflation, it will be prudent to change course and support growth recovery.

 This will require a decline in the monetary policy rate! Will this be counterproductive? The correlation between the policy rate and other indicators as mentioned is loose, which could suggest less devastating results as will be predicted.

Given that policies are evaluated by their outcomes and not their objectives, the entire economy earnestly awaits this decision and the possible results it will deliver by the end of the first quarter of 2016.

Do you ever witness news or have a story that should be featured on Pulse Ghana?
Submit your stories, pictures and videos to us now via WhatsApp: +233507713497, Social Media @pulseghana: #PulseEyewitness & DM or Email: eyewitness@pulse.com.gh.

Recommended Articles

Recommended Videos

Top Articles

1 Breaking Otabil finally breaks silence on banking controversiesbullet
2 Capital Bank Collapse Here are the roles of a non-executive board chairbullet
3 Bank Collapse Capital Bank Board misused GHC 610 million from BoG –...bullet
4 IMANI Boss Otabil may have been ‘misled’ in Capital Bank collapse...bullet
5 Investment banks in Ghana Top 5 investment banks in Ghana and...bullet
6 Banks Collapse Accounts of defunct Royal Bank managers frozenbullet
7 IMANI Boss Attacking Otabil over Capital Bank collapse...bullet
8 Collapse Bank Here’s what former staffs of Capital Bank...bullet
9 Banking Issues "Collapsed banks didn't fail; they were...bullet
10 Collapsed Bank It’s ‘incorrect’ to implicate me in...bullet

Top Videos

1 Former Capital Bank staff grills pork for survivalbullet
2 New Discovery Ghana discovers new mineral, lithium in commercial...bullet
3 Forbes 2018 Africa's billionaires rich listbullet
4 Money Alert Meet Africa's richest womanbullet
5 Plane Crash Starbow suspends operations following plane crashbullet
6 Support Finance minister buys Kantanka carbullet
7 Tech 6 reasons you should buy an iPhone SE instead of any of...bullet
8 Dr Joseph Siaw Agyepong Nobody can collapse my company –...bullet
9 New Phones Nokia MWC 2018 Event in 5 minutesbullet
10 New Phone Nokia’s MWC 2018 Event in Under 10 Minutesbullet