Interest rates on loans for businesses and individuals should begin dropping in response to the lowering of the monetary policy rate by 100 basis points to 13.5% in May, 2021.

The Monetary Policy Committee (MPC) of the Bank of Ghana, for the first time since March 2020, reduced the policy rate to 13.5% after it was kept unchanged at 14.5 % for six consecutive times.

Prior to the rate being reduced to 14.5%, it had been maintained at 16% for some time.

The reduction in the rate saw average lending rates also drop from 22.38 percent in Aril 2020 to 20.93 in April 2021.

Speaking to Citi Business News on the new rate, Banking Consultant, Nana Otuo Acheampong said the reduction was a surprise and added that expects it to lead to a drop in interest rates for businesses.

“Everybody now knows that the cost of money is going to be cheaper. So it’s good for businesses but not so good for depositors, as it will reflect in the reduction in the treasury bill rates that people will be getting.”

Nana Otuo Acheampong further added that due to competition among banks, we are likely to see banks effect a reduction in about 3 months instead of the usual 4 to 6 months, a development he believes will be welcomed by the business community.

“The business community should be excited. The problem, however, is the transmission rate. Fortunately, because of competitive nature in the banking sector, some might jump the gun and reduce their interest rates almost instantaneously. I believe in competition and, unlike previously, this should force them to quicken the transmission rate and bring down their interest rates.

“Under normal circumstances the transmission of the reduction should happen within four to six months. But due to competition I won’t be surprised if the reduction happens in about two to three months,” he added.