Food Price Pressures Forces Extension of Policy Rate Pause by BoG
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has for the second time retained the policy rate at 27% having maintained the policy rate in November, following a reduction from 29% in September 2024.
The decision, announced on Monday, January 27, 2025, aims to anchor inflationary pressures.
According to the MPC, inflationary pressures remain elevated, primarily due to persistent food price increases.
“The inflation profile remains elevated, largely driven by food price movements, especially in the last quarter of the year. The climate-related factors including the dry spell in some parts of the food-growing regions of the country and the late onset of rains, negatively affected production, while supply chain weaknesses generally affected food prices.
“While the inflation outturn for the year 2024 deviated from the target, it is expected that the disinflation process will resume, contingent on renewed efforts at fiscal consolidation, which is anticipated in the new administration’s economic policy agenda and the yet-to-be-presented 2025 budget statement. The Bank’s latest inflation forecast shows a steady decline and returns to the path of disinflation, with an extended time horizon of achieving the medium-term target of 8±2 percent.
“Under the circumstances, the Committee decided to keep the monetary policy rate unchanged at 27 percent,” announced the Governor of the Bank, Dr Ernest Addison.
Headline inflation ended December 2024 at 23.8% following a marginal increase of 0.8% in the previous month.
Meanwhile, the country’s external sector position improved significantly in 2024 on account of increased trade surplus and lower capital outflows. The current account recorded a provisional surplus of US$3.8 billion, compared with a surplus of US$1.4 billion in 2023, driven mainly by higher gold and crude oil exports, as well as strong remittance inflows.
This, together with a lower net outflow of US$588 million in the capital and financial account, relative to a net outflow of US$733 million in 2023, contributed to an improved balance of payments position for the year. The lower outflow in the capital and financial account reflects Ghana’s successful debt restructuring and the IMF ECF programme.
These favourable developments resulted in an improved balance of payments surplus of US$3.1 billion, compared to a surplus of US$518 million recorded in 2023.
Also, international reserves build-up was faster than programmed in 2024. Gross International Reserves (GIR) increased to a stock position of US$8.98 billion at the end of 2024 and was enough to cover 4.0 months of imports, exceeding targets under the IMF programme.
This compares favourably with the end-December 2023 GIR of US$5.92 billion (2.7 months of imports).
