Bank of Ghana keeps its policy rate at 16%, the fifth time since January 2019, here’s how this can reflect in your pocket

The Bank of Ghana has kept the country’s policy rate at 16 percent.

Dr Ernest Addison, Bank of Ghana Governor

This is the fifth time this year that the central bank has kept its rate unchanged; since January this year.

This was captured in the bank’s Monetary Policy Committee report.

The Governor of the Bank of Ghana, Dr Ernest Addison speaking to the media at a news conference on Monday, November 25, 2019, following the report noted that the decision was as a result of some threats to the country’s economic growth and inflation outlook.

He added that threats to inflation are broadly balanced, hence, the need to maintain the policy rate at 16 per cent

The development is expected to have little impact on the cost of credit reducing significantly.

Here's how this can reflect in your pocket

The Borrower

The borrower who is seeking to raise some funding through credit, maintaining the policy rate, to a large extent implies that Bank lending rates will remain unchanged, hence no increase in the cost of borrowing.

However, other factors may trigger an increase in bank lending rates irrespective of the policy rate being unchanged.

Borrowers (individuals or businesses) should also be aware that they may incur other costs like loan monitoring fee, processing fee and cash locked up as collateral, which could still make the cost of borrowing quite significant.

It is expected that loan monitoring fee could shoot up because there is more pressure on banks now to maintain asset quality and monitoring is one way to achieve that.

A borrower can, however, negotiate on the interest rate and other loan charges.

Individual Investors

For the individual investor who may be seeking a high yielding interest-bearing instrument, it is definitely not welcome news because of the downward trend in returns on investments.

With the fixed income investment slowed down, it is likely the equity sector would begin to pick up as activity would shift there. Therefore, mutual funds tilted towards equity may give good yields if fund managers are picking good stocks.

Maintaining the Policy rate also implies that banks may keep the fixed deposit and savings rates unchanged.

Institutional Investors

With policy rate remaining unchanged, the value in current bonds is not expected to change, hence not a good time to offload on the secondary market.

Institutional investors should turn attention to the stock exchange, both the primary stock market and the alternative market.

With the pension funds now floating around, it is expected that investment companies would begin to launch more mutual funds. Private equity firms are also likely to show up soon.

A portfolio with the structure of a typical pension fund may not lose much, even in the likely event of rate reduction in the future as they make use of professionals to invest and so they can find other alternatives to invest.


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