Why maintain monetary policy rate if macroeconomic indicators are backed by sound policies? – IERPP Fellow

A Senior Research Fellow at the Institute of Economic Research and Public Policy, (IERPP), Dr. Frank Bannor, has questioned the rationale of the Bank of Ghana to maintain the Monetary Policy Rate at 28% if macroeconomic indicators are backed by sound policies and real sector growth.

In a Facebook post sighted on his timeline, the development economist could not fathom why the central bank would entertain any fear in reducing the Monetary Policy Rate.

“If current macroeconomic indicators are backed by sound policies and real sector growth, what is the fear with inflation?” he questioned the Governor of the Bank of Ghana and his Monetary Policy Committee.

“Haven’t we been told that investor confidence is at its highest? Why the fear of a reduction in the MPR? We’re certainly practicing voodoo economics” Dr. Bannor explained.

He further averred that cost of doing business will rise, thereby hampering production. Lending rates, he stated, will not come down, and this, he emphasized, is responsible for traders’ unwillingness to reduce the prices of their goods.

The GIMPA economics lecturer agrees that keeping the policy rate at 28% is helping the rate of inflation to drop but argued that it should be hinged on market factors or forces. He described the downward trend in inflation as short-lived.

Dr. Frank Bannor charged the Bank of Ghana to introduce policies which would not come back to hurt the economy in the coming months since the ones being rolled out are only effective in the short-term.

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