Would the Bank of Ghana increase its policy rate as inflation rises?

The Bank of Ghana Monetary Policy Committee (MPC) started its review meeting on Monday. And today Friday February 18, 2011, the chairman of the MPC, who is the governor of the central bank, Mr. Kwesi Amissah-Arthur will address the media at a press conference at the Bank.

The major highlight of the conference would be his pronouncement on the Bank’s policy rate, that is the basic lending rate of the central bank.

Currently, the rate stands at 13.5%, but with a marginal increase in inflation from 8.6% in December to 9.1% in January it is not so clear yet what the central bank would do. Would it reduce or increase the policy rate?

Speaking to ghanabusinessnews.com on the phone, Mr. Samson Akligo of Databank said looking at the marginal increase in inflation which does not signal enough room for an increase of the policy rate, he is of the view that the Bank has two options either to maintain the current rate at 13.5% or increase it marginally to about 13.75%.

But he indicated that the Bank is more likely to maintain the current rate, because “banks’ credit recovery level is not strong yet. It is still at pre-crisis level,” he said.

By Emmanuel K. Dogbevi