BoG seeks to steepen yield curve
January 31, 2019
In an innovative effort to solve the two biggest challenges facing monetary policy in the country at the same time, the Bank of Ghana is seeking to steepen the yield curve on financial assets, securities and loans inclusive, by exerting downward pressure on short term interest rates while at the same time leaving longer term interest rates to rise.
The new monetary policy strategy was revealed by the BoG’s Governor, Dr Ernest Addison on Monday in his role as chairman of the central bank’s Monetary Policy Committee.
The BoG has cut the key Monetary Policy Rate by 100 basis points to a new low of 16 percent with a view to stemming, or possibly reversing the ongoing increase in short term interest rates as indicated by the rates for government’s benchmark 91 day and 182 day treasury bill rates. However, the central bank expects the cut not to affect medium to long term yields on government’s benchmark treasury bonds which have been rising on the secondary market at even faster pace than their short term counterparts.