Why Maintain Monetary Policy Rate if Macroeconomic Indicators are Backed by Sound Policies? – IERPP’s Fellow

Dr. Frank Bannor is a Senior Research Fellow at the Institute of Economic Research and Public Policy (IERPP). He questions why the Bank of Ghana keeps the Monetary Policy Rate at 28%. He believes this decision does not align with positive macroeconomic indicators.

In a Facebook post, Dr. Bannor expressed confusion over the central bank's reluctance to lower the rate. He asked, “If macroeconomic indicators are strong, what is the fear with inflation?” He also questioned why there is concern about reducing the MPR when investor confidence is reportedly high.

Dr. Bannor criticized this approach as "voodoo economics." He warned that high rates increase business costs and hinder production. He noted that lending rates will remain high, discouraging traders from lowering prices.

While he acknowledges that keeping the policy rate at 28% helps reduce inflation, he argues it should be based on market forces. Dr. Bannor described the current decline in inflation as temporary.

He urged the Bank of Ghana to implement long-term policies. These should avoid negative impacts on the economy in future months. Current measures may only provide short-term benefits, he cautioned.