Following the reduction of the monetary policy rate by 100 basis points to 13.5 percent in May 2021, interest rates on loans to firms and people should begin to fall.
The Bank of Ghana’s Monetary Policy Committee (MPC) decreased the policy rate to 13.5 percent for the first time since March 2020, after keeping it at 14.5 percent for six consecutive meetings.
The rate had been kept at 16 percent for a long period before being cut to 14.5 percent.
Average loan rates fell from 22.38 percent in April 2020 to 20.93 percent in April 2021 as a result of the rate reduction.
Banking Consultant Nana Otuo Acheampong, speaking to Citi Business News on the new rate, said the cut was unexpected and that he expects it to result in lower interest rates for companies.
“Everyone now understands that the cost of money will be lower. So that’s beneficial for corporations but bad for depositors, as it will reflect in the lower treasury bill rates that consumers would receive.”
Nana Otuo Acheampong also stated that, as a result of bank rivalry, we are expected to see banks implement reductions in around three months rather than the typical four to six months, a trend he feels would be welcomed by the business sector.
“The corporate world should be ecstatic. The transmission rate, on the other hand, is the issue. Fortunately, because to the competitive nature of the banking industry, some banks may be able to jump the gun and lower their interest rates relatively immediately. I believe in competition, and this, unlike in the past, should encourage them to speed up transmission and lower their interest rates.
“Under typical conditions, the decrease should be transmitted within four to six months. But, because of the competition, I wouldn’t be shocked if the price drops in two to three months,” he said.
Source: CITIBUSINESSNEWS
