Economist, and Head of the Economics Department at the University of Ghana, Professor Peter Quartey has stated that the reason for the further reduction in the policy rate is aimed at stimulating economic growth through the private sector.
The policy rate was on Monday,[May, 21st, 2018] reduced from 18 percent to 17 percent, representing a drop in 100 basis points at a press conference addressed by the Governor of the Bank of Ghana, Dr. Ernest Addison.
In March this year, the central bank reduced the policy rate by 200 basis points from 20 percent to 18 percent.
According to Prof. Quartey, government’s agenda fits perfectly into the declining policy rate being recorded.
“There is strong expectation for a reduction giving the policy direction of government that is to achieve a lower inflation rate of 8 plus or minus 2 percentage point so that is in line”.
He stated that the desire to encourage the private sector to lead in economic growth could be the main reason why the central bank is adjusting the policy rate downwards.
“I think the basic policy is to stimulate the private sector through lower cost of credit and thereby generate the needed jobs, so it is basically moving away from taxation to production and that is one of the key anchors to ensure that the private sector picks up and be able to stimulate employment” he stated.
Meanwhile, the Ghana Union of Traders Association (GUTA) has insisted that although the BoG keeps reducing the policy rate, it is yet to reflect in their businesses.
An Executive Member of GUTA, Benjamin Yeboah charged that the reduction must reflect in their business activities.
“We are not feeling it that much. The real feeling is when you go for some financial help from the bank and usually it is the interest rate from the bank. If the policy rate goes down and the interest rate still remains high, then where are we headed?” he asked.
By: Pius Amihere Eduku/Jessica Ayorkor Aryee/ citibusinessnews.com/Ghana