Business News of Tuesday, 1 June 2021
Source: www.ghanaweb.live
2021-06-01Policy rate cut likely to take effect in about three months – Banking Consultant
Nana Otuo Acheampong, Banking Consultant
•The Bank of Ghana has lowered the monetary policy rate to 13.5% from 14.5%
•Otuo Acheampong believes the drop will see a reduction in interest rates for businesses and individuals
•He said it may take effect in about 3 months compared to the typical 4 to six months
Banking Consultant, Nana Otuo Acheampong, has
Read full articlepredicted a drop in the interest rates for businesses and individuals following the Bank of Ghana’s decision to lower the monetary policy rate from 14.5% to 13.5%.
According to him, a reduction in the rate came as surprise to market analysts as it was cut by some 100 basis points and will likely take effect among banks, businesses, and individuals as they respond to the move in about three months instead of the typical 4 to 6 months.
In an interaction with Citi Business News monitored by GhanaWeb, Otuo Acheampong believes the decision will however not bode well for depositors as it will reflect on treasury bill rates.
“Everybody now knows that the cost of money is going to be cheaper. So, it’s good for businesses but not so good for depositors, as it will reflect in the reduction in the treasury bill rates that people will be getting.”
He continued, “The business community should be excited. The problem, however, is the transmission rate. Fortunately, because of competitive nature in the banking sector, some might jump the gun and reduce their interest rates almost instantaneously. I believe in competition and, unlike previously, this should force them to quicken the transmission rate and bring down their interest rates.
“Under normal circumstances the transmission of the reduction should happen within four to six months. But due to competition, I won’t be surprised if the reduction happens in about two to three months,” he added.
Prior to a cut in the policy rate, the central bank’s Monetary Policy Committee (MPC) kept is policy rate unchanged at 14.5 percent for six consecutive times since March 2020.
The policy rate is of key interest to businesses operating in the country as it influences the interest rate on loans and determines the rate at which the central bank lends to commercial banks.
