Ghana’s policy rate has declined to 16 per cent this year. Here’s how this can affect your pocket

This follows an announcement by the Monetary Policy Committee (MPC) of the Bank of Ghana.

The committee reduced the policy rate by 100 basis points and this amounted the reduction to 16 per cent for the universal banks in the country.

This reduction is the first time since March 2018.

According to the Central Bank, the move was influenced by a fairly stable outlook for the economy.

In March 2018, the Bank of Ghana reduced the rate by 200 basis points from 20 per cent to 18 per cent.

Experts have revealed that this development is likely to influence the cost of credit in the country.

The Governor of the central bank, Dr Ernest Addison who spoke at a news conference after meeting to review the health of the economy disclosed that they are convinced about the measure’s government is taking to stabilize the economy and check its rising expenditure.

Here's how the new rate is likely to affect your pocket

This is a piece of welcoming news to the borrower (the one who is seeking to raise some funding through credit). Although this won’t appear so fast, banks are expected to adjust their lending rates. The general underlying factor for the cost of funds will now be relatively lower.

However, borrowers (individuals or businesses) can negotiate on interest rate and other loan charges since they may incur other costs like loan monitoring fee, processing fee and cash locked up as collateral.

Also, investors have got their share in the reduction. With the decline of the policy rate from 17% to 16%, the current bonds would see their value appreciate and so can get some gains especially if traded on the secondary market. It is, therefore, time for institutional investors to begin looking more to the stock exchange, both the primary stock market and the alternative market.