The Monetary Policy Committee of the central bank has announced that the policy rate has been maintained at 16 percent for the time in a row given recent developments that have slowed the disinflation process.

Inflation moved to 9.5 percent in April from the 9.3 percent recorded in March this year, prompting fears that the trajectory may continue considering exchange rate volatilities, hence, the bank’s decision to keep the rate where it is.

“On the inflation outlook, the Monetary Policy Committee noted that the recent exchange rate pass-through has slowed the disinflation process, leading to a slightly elevated inflation profile as shown in the latest forecasts. However, core inflation remains subdued and inflation expectations fairly anchored.

Under the circumstances, the Monetary Policy Committee decided to keep policy rate unchanged at 16 percent. The Committee will continue to closely monitor both global and domestic developments and stands ready to take appropriate measures, if necessary, to maintain price stability,” Governor of Bank of Ghana, Dr. Ernest Addison said.

The announcement came unsurprisingly as a 0.5 percentage point increase in inflation since January automatically ruled out any likelihood that the Monetary Policy Committee will cut the monetary policy rate.

What this also means is that average lending rates of banks in Ghana will continue to remain high as the policy rate determines to a large extent how much banks will lend to businesses and households. Average lending rates of banks currently hovers around 28 percent, a figure that businesses have constantly complained is too high; and partly accounts for the high NPLs in banks’ books —18.9 percent.

The inability of businesses to pay back loans owing to high lending rates is reflected in the Banking Sector Report published by the Bank of Ghana which shows that indigenous private enterprises accounted for 75.4 percent of total NPLs in February 2019, while the contribution of foreign enterprises was just 10.2 percent.