The Monetary Policy Rate, which is of keen interest to businesses, signals the rate at which the Central Bank will lend to commercial banks.

It also subsequently influences average lending rates on loans to individuals and businesses.

The key rate, at the start of this administration in 2017 hovered around 25.5 per cent.

This also fed into the average lending rate, which was above 30 per cent around that time. Gradually, the Central Bank implemented consistent cuts in the policy rate, which led to its downward trajectory.

From the highs of 25.5 per cent in January 2017, the policy rate dropped to 20 per cent in January 2018; to 16 per cent in January 2019 and January 2020; to 14.5 per cent in January 2021 and all the way to 13.5 per cent in June 2021, before being raised by a 100 basis points to 14.5 per cent in November 2021.

The trajectory in the average lending rate has generally matched that of the policy rate.

Between January 2017 and January 2022, the policy rate dropped by about 43 per cent from 25.5 per cent to 14.5 per cent.

The average lending rate, on the other hand, has dropped by about 37 per cent from 31.8 per cent to 20.16 per cent within the same period.

Following the recent hike in the policy rate to 17 per cent, Banking Consultant Nana OtuoAcheampong told Citi Business News, that an increase in interest rates is inevitable.

“I’m afraid that in a free market economy, nobody can put systems in place to stop market players from doing what they have to do. So, yes, we have spoken about how the transmission rate works when the rate is moving northwards but becomes slow when the rate is moving southwards. That trend wouldn’t change. So we should expect an increase in rates.”