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Prime Rate Increased by BOG |
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As a result of economic uncertainties occasioned by oil price hikes and food inflation, the Bank of Ghana has pushed up the prime rate from 13.5 to 14.25 percent. |
This confirms some economic and financial analysts’ prediction that the prime rate was going to go up due to some of these factors.
The move means lending rates from universal, merchant and commercial banks are to go up.
Announcing the latest development at a press conference yesterday, Dr. Paul Acquah, the Central Bank Governor explained that the extent of build-up or unwinding of domestic demand prices triggered the upward adjustment.
Core inflation had increased consistently for the past five months along with increases in similar indicators tracking underlying inflationary pressures, he stated.
Importantly, the balance of risks is on the upside and this makes it necessary that monetary policy stance continues to be tuned to ensure that expectations remain anchored to stability and consistent with a process of disinflation to secure the environment for steady expansion of output, he added.
All these measures are part of the inflationary targeting framework adopted by the Central Bank last year to help check inflation from rising significantly.
The quest to maintain a strong domestic demand which was underpinned by considerable fiscal stimulus, the easing of credit conditions, and rapid growth in bank loan portfolio including consumer loans which has increasingly become sectorally broad-based was also a major reason to push the prime rate up.
Growth in total liquidity has been underpinned by a strong growth in deposits over the same period with demand deposits growing by 24.6 percent to GH¢1,507.0 million at the end of January 2008, compared with a growth of 42.9 percent for the same period in 2007.
The non-performing loans (NPL) ratio also declined further to 6.8 percent at the end of January 2008 compared to the 7.5 percent during the same period last year. |
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