https://www.myjoyonline.com/policy-rate-to-go-up-above-inflation-rate-financial-expert/-------https://www.myjoyonline.com/policy-rate-to-go-up-above-inflation-rate-financial-expert/

Even before the Bank of Ghana announces its Policy Rate on Monday, 21st March, 2022, the Central Bank’s base lending rate is being forecast to go up within the range of 15.8% and 19.2%.

According to the Chief Finance Officer of Valley View University, Dr. Williams Peprah, the Central Bank’s base lending rate since 2021 has been higher than the inflation rate.

Following the 15.7% inflation rate for the month of February 2022, it is expected that the policy rate will be higher.

“The monetary policy rate since 2021 has always been higher than the inflation rate. The average difference between these two rates for the past year has been 3.5%. As the February 2021 inflation rate was 15.7%, it is anticipated that the MPC rate for the coming quarter should be set at a range of 15.8% to 19.2% by the Bank of Ghana”, he pointed.

This shall mean an estimated 130 to 470 basis points increase in the MPC rate for March 2022.

“Therefore, it is projected that 200 basis points may be added to increase the MPC rate from 14.5% for March 2022 outcome. Should BOG try to address the free fall of the Ghana Cedi against the foreign currencies, then an MPC rate must be set at 19.2%”, he explained.

This, he said, may cause interest rates to increase and make government securities attractive and prevent hoarding of foreign currency as an investment. The impact will be that the cost of funds shall be expensive and will slow down the economy for a short-term strategy.”

MPC Rate v Inflation Rate

MonthsMPC Rate %Inflation Rate %Difference %
Feb-2114.510.34.2
Mar-2114.510.34.2
Apr-2114.58.56
May-2114.57.57
Jun-2114.57.86.7
Jul-2113.594.5
Aug-2113.59.73.8
Sep-2113.510.62.9
Oct-2113.5112.5
Nov-2114.512.22.3
Dec-2114.512.61.9
Jan-2214.513.90.6
Feb-2214.515.7-1.2

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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.