Predictable Monetary Policy Key to Ghana’s Economic Recovery

Economic Policy Analyst, Ebenezer Otu Okley, has welcomed the Bank of Ghana’s recent decision to loosen its monetary policy stance, describing it as a positive signal for investors and the business community, while stressing the need for sustained policy stability.

Speaking on Business Breakfast on Zed FM, Mr. Okley explained that economic cycles naturally involve periods of tightening and expansion, but emphasised that relative stability remains the most critical factor for effective economic planning.

“In every phase of economic growth, stability is very crucial for planning,” he said, noting that frequent shifts in policy direction can undermine investor confidence and long-term decision-making.

According to him, the current trend, characterised by a decline in interest rates should not be viewed as tightening but rather as monetary expansion or loosening, aimed at stimulating economic activity. He recalled that the central bank recently opted to loosen the monetary policy rate, a move he believes is beneficial for businesses.

“This is good news for investors and business people because it improves access to funds and loans at more favourable rates. At such rates, businesses can borrow at levels that are more sustainable and supportive of growth,” Mr. Okley explained.

Mr. Okley referenced last year’s experience, when the policy rate hovered around 25 percent for several months, providing a degree of predictability, even though the rate remained relatively high.

However, he cautioned that beyond reducing rates, the central bank must ensure policy consistency. He argued that interest rates should remain stable for a reasonable period rather than being adjusted too frequently.

He urged monetary authorities to balance flexibility with consistency, stressing that predictable policy direction is essential for supporting Ghana’s economic recovery and long-term growth.

Economic Policy Analyst also highlighted the contrasting effects of a tight monetary policy on investors and the wider economy, noting that while higher policy rates benefit savers, they can also constrain productive investment.

Mr. Okley explained that when the central bank tightens monetary policy by increasing the policy rate, investors who place their money in savings, treasury bills or government bonds tend to benefit from higher returns.

“For investors who are saving or buying treasury bills or government bonds, a higher policy rate is good news because it means higher interest on their investments,” he said.

However, he cautioned that the same policy stance carries broader economic implications. According to him, elevated interest rates discourage production, innovation and creativity by making it more expensive for entrepreneurs and businesses to access capital. Mr. Okley noted that individuals with viable business ideas often require financing to turn those ideas into reality. In a high-interest-rate environment, many are unable or unwilling to borrow due to the high cost of credit. long-term growth.