Senior Economist at Databank, Courage Martey has opined the recent hike in the monetary policy rate will make the fixed income market more attractive.
The Bank of Ghana on Monday 21, 2022 announced an upward adjustment in the rate by 250 basis point to 17 percent.
Reacting to the development, Martey explained the move will make investors on the equity market to make some adjustment in their portfolio holdings on the domestic stock market.
“The policy rate is the anchor interest rate for other interest rates on the market because it is what signals the direction other interest rates should go. So, if the policy rate goes up, it is signalling to the other interest rate or owners of capital that interest rates should go up. So, interest rates on the market particularly the fixed income market will start to go up, and we are already seeing it on the market, across the yield curve from the short end to the longer end and the hike in the policy rate will only sustain the increase,” he is quoted by Citi Business News
“Now once, interest rates go up investors will see that if I invest in fixed income security and I earn a higher interest rate annually over the period of a fixed-income investment that assures me of a certain return which is not guaranteed on the stock market. So, you will start to see investors moving away from the stock market to lock their capital in a higher interest-bearing investment like fixed income securities,” Martey added.
Meanwhile, the Bank of Ghana has hiked its monetary policy rate to 17 percent from an initial 14.5 percent.
The decision by the central bank is a 250-basis point adjustment.
Governor, Dr. Ernest Addison, attributed the increasing public debt stock, cedi depreciation, risks to the inflation outlook, straining fiscal policy, global financial constraints among others as contributing factors to the increase in the monetary policy rate.
