The business community in Ghana is hopeful for a possible policy rate cut in the next Monetary Policy Committee meeting of the Bank of Ghana (BoG) following the eight consecutive drop in the country’s headline inflation rate.
Businesses are mounting calls on the Central Bank to respond decisively by easing its policy rate since the conditions warrant that.
The latest inflation figure of 11.5%, below the government’s end-of-year target of 11.9%, has strengthened the case for businesses struggling under the weight of high borrowing costs.
Chief Executive Officer (CEO) of the Ghana National Chamber of Commerce and Industry (GNCCI), Mark Badu-Aboagye, is urging the Central Bank to seize the moment and bring relief to businesses.
For the CEO, given that inflation has fallen below the end-of-year target ahead of time, there is no justification to continue keeping the policy rate at the current high levels.
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“This is a very compelling signal to the Central Bank that if had a sustained inflation right from the beginning of the year to the level that we have today at 11.5, which as you said we’ve gone below the year target of 11.9, so assuming that the Central Bank uses 11.9 as their measure for putting the policy rate that high, now there’s a reason why they should reduce it,” Mark Badu Aboagye noted.
The policy rate, which influences the cost of credit across the financial sector, has remained at a relatively high level, although it was cut after the last meeting, as the Central Bank battled inflationary pressures and currency instability over the past two years.
For businesses, the relatively high policy rate has resulted in a high lending rate, squeezing companies already navigating high operational costs.
But with key indicators pointing in the right direction, such as falling inflation, relative exchange rate stability, and stronger fiscal discipline, the Chamber believes the time is ripe for monetary policy to shift from firefighting to stimulating growth.
“We will still appeal to the Central Bank that all indicators, macroeconomic policy indicators, are pointing in the right direction, so the Central Bank should continuously ease the monetary policy rate, and that, of course, will translate into a lower interest rate for businesses,” he noted in an interview monitored by The High Street Journal.
He added, “We are expecting that at the next Monetary Policy Committee review, the Central Bank will look at the data, look at the current inflation rates, look at what is happening within the exchange rate market, look at other indicators, and we are very optimistic that the Central Bank will reduce the policy rate further for business.”
Given the optimism of the business community, the next MPC meeting is crucial. A rate cut could be the catalyst businesses need to expand production, hire more workers, and push investments that have been shelved due to prohibitive financing costs.
For small and medium-scale enterprises (SMEs), in particular, cheaper credit could mean the difference between survival and collapse.
