Policy rate hike ideal, but would hurt businesses amid rising fuel, utility costs – Prof Quartey

Economist Professor Peter Quartey has backed the Bank of Ghana’s decision to maintain the policy rate at 14%.

He says the decision is appropriate given the inflationary threats facing the economy.

Speaking on Joy News’ PM Express Business Edition on Thursday, Prof Quartey pointed to rising global oil prices and uncertainty over how the situation will develop.

“Well, it’s certainly a good move because if you look at the threats to our macro economy, you realise global oil prices have been going up and are likely to go up,” he said.

“We’re not sure what the near end is going to look like.”

He said Ghana was also facing other inflationary pressures, including increases in utility charges and fuel prices.

“So, and inflationary threats are there, and you’ve seen utility increases, we’ve seen increases in fuel prices at the pump, etc.,” Prof Quartey said.

He therefore described the decision to keep the rate unchanged as appropriate under the circumstances.

“So it is just laudable, or it’s just ideal that you maintain the rate,” he said.

However, Prof Quartey acknowledged that the global economic environment could support a higher policy rate.

“It’s quite a difficult one. If you really want to look at what is happening globally, you may want to hike the rate, but that would not be ideal for businesses, would not be ideal for the cost of doing business,” he said.

He said the Bank of Ghana’s approach was to monitor developments before taking its next decision.

“And therefore, the bank is taking the approach of basically to watch the space a little bit and see how it comes out, and then we’ll take a decision,” he said.

Prof Quartey ultimately endorsed the decision to maintain the policy rate.

“But I think it’s certainly in the right direction,” he said.

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