According to Professor Godfred Bokpin, a finance lecturer at the University of Ghana Business School, it may be too rushed a decision for commercial banks in Ghana to decrease their lending rates in response to the recent drop in the country’s inflation rate.
Bokpin’s remarks come on the heels of the Bank of Ghana’s appeal to commercial banks to reduce their lending rates in light of the continuing downward trend in inflation figures.
Bokpin acknowledges that the call by the Bank of Ghana is a positive step, but he stresses the significance of the central bank’s policy rate and its potential response in the upcoming months.
In his opinion, if the Bank of Ghana determines that the process of disinflation is firmly established and will rapidly decrease, then this should be reflected in the policy and treasury bill rate.
Bokpin also highlighted the three important variables in Ghana’s reference rates: the policy rate, treasury bill rate, and interbank rate.
He argues that if the rate at which the Bank of Ghana lends to commercial banks does not significantly decrease to reflect the reduction in inflation, then it does not have the moral right to ask commercial banks to do more than it is willing to do.
“Generally, we will say it is a good call but to the extent that it is coming from the Bank of Ghana is even more interesting. The question will be how will Bank of Ghana’s policy rate respond in the next couple of months. Because if it is the considered view of the central bank that the process of disinflation has become entrenched and will come down sharply, then that should also reflect in the policy and treasury bill rate.”
“There are three variables that are very important in the Ghana reference rates coming down. The policy rate, treasury bill rate and the interbank rate. So if the rate at which the Bank of Ghana itself will be lending to the commercial banks does not come down drastically to reflect the reduction in inflation, it does not have the moral right to ask commercial banks to do more than it is willing to do.”
Inflation has dropped to 41.2 percent for the month of April 2023. This represents a 3.8 percentage point decrease from the 45.0 percent recorded in March 2023.
This was captured in the Consumer Price Index (CPI) data released by the Ghana Statistical Service (GSS) on Wednesday, May 10, 2023.