MPC stays policy rate at 29%
Dr Ernest Addison — BoG Governor
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MPC stays policy rate at 29%

The Monetary Policy Committee of the Bank of Ghana (BoG) has maintained the policy rate at 29%.

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The rate was maintained for the second consecutive time this year despite the elevated risks to inflation.

Addressing the media at the 118th MPC press conference, Governor of the Bank of Ghana, Dr Ernest Addison, said although the latest forecast showed a slightly elevated inflation profile on account of recent exchange rate pressures and adjustments in transportation fares, the projections showed that inflation would remain within the monetary policy consultation clause of 13-17% at the end of the year.

“These forecasts are contingent on sustaining the tight monetary policy stance, including aggressive liquidity management operations,” he said.

He said the MPC was of the view that while implementation of policies—at the macro and structural reform level — were consistent and aligned well with the tenets of the 

IMF-supported programme, there was the need to ensure that the recent depreciation of the currency did not become embedded into the pricing behaviour of businesses and on inflation expectations.

He said the strong reserve build-up of about US$2 billion since the beginning of the IMF programme, the strong disinflation process, significant progress on fiscal policy consolidation, positive current account balances, and the good progress on the external debt restructuring process, have all worked together to deliver enough buffers to support the exchange rate.

Context 

Ghana’s economy has been grappling with high inflation, with the rate reaching a 22-year high and a peak of 54.1% in December 2022.

In response to the rising inflation, the Monetary Policy Committee of the Bank of Ghana kept a tight monetary policy stance by consistently increasing the policy rate to 30% by the end of 2023.

With inflation easing in 2023, reducing to 23.2% in December 2023, the central bank, for the first time in two years, reduced the policy rate to 29% in January 2024 and has since maintained the rate at 29%.

Going into its third Monetary Policy Committee meeting for the year, the BoG came under some pressure from the business community to further reduce the policy rate to allow businesses access finance at cheaper rates.

However, the International Monetary Fund (IMF) has cautioned central banks who still have inflation higher than their target bands to maintain a tight monetary policy.

Ghana’s current inflation rate of 25% is two times higher than the central banks’ target band of 6%-10%.

The IMF said although inflation in such countries might have been on a consistent decline in recent months, it was still too early to relax their monetary policy rates.

It said such countries might pause on increasing the policy rate, but added that it would be too early to reduce them.

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