Economist and senior lecturer at the University of Ghana Business School, Dr. Lord Mensah, has urged the government to reduce the policy rate which is pegged at 14.5% to mitigate the adverse impact of the Coronavirus pandemic.
The Monetary Policy Committee (MPC) of the Bank of Ghana at its last review maintained the policy rate at 14.5 per cent.
This is the first time the rate has been kept unchanged after it was reduced by 150 basis points early this year.
The MPC, at the time, said the decision was among other things influenced by the need to ease the impact of the COVID-19 pandemic on businesses.
Reacting to this, Dr. Lord Mensah called for further reduction of the policy rate to serve as stimulus package by way of re-energizing the economy.
He explains that reducing the policy rate will help inject liquidity into the financial sector.
“The reduction of the policy rate by itself is a way of providing stimulus to the economy. The last time the BoG reduced it by 1.5% and I thought the Bank of Ghana will continue in that trajectory. Because if you (BoG) keep the policy rate over a long period and you reduce it suddenly, the response will be very minimal.”
The policy rate, which is the rate at which the central bank lends to commercial banks, and is also used by banks to calculate their base rates, was kept unchanged at 16 per cent for at least five consecutive times prior to its reduction to 14.5%.
Story by: Nicholas Brown | universnewsroom.com