The Central Bank yesterday maintained the Policy Rate, the rate at which it lends to commercial banks, at 17 percent.
Dr Ernest Addison, Governor of the Bank of Ghana (BoG), who is also chairman of the monetary policy committee (MPC), announced this at a press conference.
Giving a narrative on developments in the money market space, he said interest rates continued to trend downwards, while the interest rates on the 91-day Treasury Bill declined further to June 2018 from 16.9 percent a year ago.
Similarly, he said the 182-day instrument declined to 13.9 percent from 17.1 percent, while the 1-year note also dropped to 15.0 percent from 19.0 percent over the same comparative period.
Again, the governor said the weighted average interbank rate, the rate at which commercial banks lend to each other, declined further to 16.4 percent in June 2018 from 24.9 percent a year ago, adding that the Ghana Reference Rate also declined from 16.74 percent in May 2018 to 16.19 percent in June.
External developments
Furthermore, he said over the past two months, normalization of US monetary policy, resulting in strengthening of the US dollar and rising US yield rates, had continued to weigh-in on emerging market assets.
“A combination of these factors led to tight financing conditions and reverse capital flows in a number of emerging market and frontier economies, including Ghana.
“These external factors, together with increased demand for foreign exchange from the corporate and energy related sectors, exerted pressure on the domestic currency market. Consequently, the cedi, which performed strongly against the major international currencies over the first four months of the year, depreciated in May and June.
“In the year to July 19th, the cedi has cumulatively depreciated by 5.8 percent against the US dollar, compared to 3.9 percent observed during the same period of last year. Despite the sharp depreciation observed, the real effective exchange rate (in trade-weighted terms) remained broadly aligned with underlying fundamentals.”
By Samuel Boadi