Economist and lecturer at Wisconsin University, Dr. Sam Worlanyo Mensah says the reduced policy rate by the Bank of Ghana may not take immediate effect.
Last week, the Monetary Policy Committee (MPC) of the Bank of Ghana reduced the policy rate which determines the rate at which banks borrow from the central bank, by 150 basis points from 16 to 14.5 percent.
In line with this, the Bank of Ghana says it will sanction banks and other Specialized and Deposit Taking Institutions that fail to efficiently utilize its interventions to increase liquidity to curb the impact of the coronavirus pandemic.
But speaking to Univers Business, Dr. Worlanyo Mensah explained why the intervention by the central bank may not reflect on banks’ lending rate immediately.
“Financial managing and financing doesn’t work like that because people have invested into these financial institutions with funds. The contract has been signed, a year has been done and so it may not take immediate effect as time soon. Maybe they can have a review of six months or a year. So we should be able to see some form of changes from July, August there about or by the end of the year,” he told UniversBusiness
Dr. Worlanyo Mensah however imployed commercial banks to allow the reduced policy rate by the MPC of the Central Bank to reflect in their lending rates.
“Is a welcoming news and various financial institutions, commercial banks must also take into consideration and equally review their charges on loans and other financial services parent debt,” he stated.
Story: Nicholas Brown | universnewsroom.com