The Bank of Ghana has cut its key benchmark lending rate to 12.5 percent from 13 percent. The decision to cut its policy rate was announced at the end of a two-day meeting by the Monetary Policy Committee to review the health of the economy. The policy rate is usually an indication of the rate commercial banks can borrow from the Central Bank. Announcing the rate at a news conference on Wednesday, the Governor of the Bank of Ghana, Kwesi Amissah Arthur, explained that its decision to cut the rate by 50 basis points was influenced by a favorable fiscal and inflation outlook. The MPC noted that though government appears to be making some gains on how it will manage its revenue and expenditure, it however recovered a narrow budget deficit for the first half of the year. Total exports of goods for the first five months of the year went up by 32 percent, boosted by exports of crude oil from the jubilee field. Interactions with consumers and businesses in the bank's regular survey for June showed less optimism by business and consumers in the economy. Overall, business confidence also declined marginally, driven by weaker welfare expectations. On the banking front, there was some good news as the sector appears to be increasing credit to small businesses and reducing the loans that have gone bad. The banks’ ability to withstand losses however declined marginally. Meanwhile some economists believe the Central Bank’s decision to cut the rate is a prudent one. Manufacturing firms also believe though the cut is welcome, the Central Bank must ensure that the commercial banks respond accordingly. Source: Joy News