The Bank of Ghana has reduced the policy rate to 18 percent.
This represents a 200 basis points reduction in the policy rate which was at 20 percent.
Today’s announcement of a reduction is the first after the rate was maintained earlier in the year.
The policy rate is the rate at which the central bank lends to commercial banks for onward lending to their customers.
The Governor of the Bank of Ghana, Dr. Ernest Addison speaking at a press conference noted that the decision to reduce the rate was based on the central bank’s moves to achieve the annual inflation target.
According to him, the Monetary Policy Committee (MPC) decided to reduce the policy rate to also help ease the burden of interest payments on the budget.
“The Committee noted that the current inflation forecast provides scope for monetary policy to realign interest rates, translate the disinflation gains achieved so far to the market, and reinforce the fiscal consolidation process by easing the burden of interest payments on the budget. Under these circumstances, the Committee decided to reduce the monetary policy rate by 200 basis points to 18.0 percent”.
Dr. Addision explained that the disinflation process firmed up over the first two months of the year, with significant moderation in price pressures.
He stated that both headline and core inflation broadly trended down, alongside easing inflation expectations, an indication that the disinflation process remains well-anchored.
“Our latest forecast suggests that the medium-term inflation target of 8±2 percent is within the forecast horizon and we are on course to meeting the inflation target band,” he assured.
He made the disclosure when he addressed the media on Monday morning.
By: Lawrence Segbefia/citibusinessnews.com/Ghana