The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased the policy rate by 200 basis point to 21 percent.
This is the highest rate since December, 2003 when the rate was at 21.50 percent.
The policy rate which is used by commercial banks to calculate their base rates was at 19 percent prior to the increment.
Industry players fear the latest hike will lead to an increase in interest rates which hover around 35 percent on the average.
But Governor of the Bank of Ghana Dr Henry Kofi Wampah says the increment will help tame inflation which currently stands at 16.9 percent, the highest since March, 2010 and also to ensure that the existing tight monetary policy stance is maintained while still operating within the corridor set by the committee.
According to him, “the committee is concerned about the outward shift in the medium term inflation path relative to the previous forecast. The latest forecast shows inflation will continue to remain outside the target band but will ease towards the medium term target of 8.0 percent which we hope to achieve towards the first half of 2016.”
Government’s annual inflation target for this year is 13 percent.
Heightened inflation has pushed the monetary policy committee of the bank of Ghana to push the policy rate to 21 percent. The latest hike is expected to have an impact on interest rates.
But industry players in the banking industry have described the increment as shocking.
Banking consultant Nana Otua Acheampong told Citi Business News the latest development is shocking.
“It is shocking news for those of us in the banking sector. The Minister of trade had just said come January 2015 he was going to wage war on the high interest rate in the country and now with this current rate then the idea of single digit interest rate is dead until the prime rate comes down.”
By: Vivian Kai Mensah/citifmonline.com/Ghana