March 2023 Monetary Policy Committee Meeting Ended Today | Effect of BoG lending rate on loan interests

      financial sector complaint

      March 2023 Monetary Policy Committee Meeting Ended Today | Effect of BoG lending rate on loan interests

      The March 2023 Monetary Policy Committee meeting has come to an end today, 24th March 2023. The Bank of Ghana policy lending rates to commercial banks is one major metric that is announced after every MPC meeting.


      1. The Monetary Policy Committee is made up of primarily members from the bank of Ghana and two external members.

      2. The committee’s job is to analyse the economic health of the country and offer monetary policies that should safeguard the economy.

      3. One major metric used to control the flow of money and, for that matter, the inflation rate in the country is what is known as the policy rate.

      4. The policy rate is the rate at which the Bank of Ghana lends money to commercial banks in the country whenever the banks need funds from the central bank.

      5. The commercial banks therefore use the policy rate as a baseline to loan money to customers, because the commercial banks can not logically be loaning money to customers at a rate less than the interest the bank itself is expected to pay to the bank of Ghana.

      6. Currently, the bank of Ghana pegged the policy rate at 28%.

      7. The major role the policy rate plays is to control inflation in the economy. The logic is that, when citizens are able to access cheap money (loan), then more money will be chasing the same products that would cause sellers to increase the price of the product. The opposite case is also considered to be true. That is, when money is expensive to access by citizens, then only a little money will be chasing the same product which will make sellers reduce prices for citizens to be able to buy and therefore reduce the inflation rate in the country.

      8. The Bank of Ghana started increasing the policy rate when inflation in the country started to skyrocket. Inflation rate is presently at 52.8% while policy rate is at 28%.

      9. Inflation reached a rate of 54.1% in December 2022. However, for the past two (2) months, there has been a marginal decrease in the inflation rate, which is presently at 52.8%.

      10. Also, the policy rate was increased to the current 28% when inflation was lower than the present 52.8%.

      See also: 4 Key Things To Do Before Signing Any Insurance Policy

      11. The Monetary Policy Committee briefing after their latest meeting is scheduled for Monday 27th March 2023. The key information that concerned citizens will be observing is the policy rate that the committee will be announcing.

      12. Though the committee may have extra information that will determine their decision, our team believe the policy rate will be maintained. The committee has the choice to increase the rate or decrease it or maintain it.

      13. The reason for our prediction is that the rate at which banks lend money to customers is already high at a level many have never witnessed before. The high rate is also affecting businesses which require the needed funds to survive the current economic crisis. Increasing the policy rate will only mean the banks will also adjust their lending rates higher to worsen the conditions of businesses and customers. Also, we consider the fact that the current policy rate may have been yielding results in bringing down inflation rates, albeit marginally. It will be wise to wait a bit to feel the full effect of the current policy rate instead of increasing the rate to worsen issues or to decrease the policy rate to worsen inflation.


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