BoG Responds to Inflation Risks with 28% Benchmark Interest Rate
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has raised its prime rate to 2,800 basis points (28%).
The decision follows a reduction in the prime rate from 29% to 27% in September 2024 and a pause in November 2024 and January 2025.
The Bank of Ghana (BoG) has cut rates by 300 bps since last year and a survey by Reuters suggests that rates would be cut by 100 bps to 26% in May this year with another cut of 125 bps to 24.75% in the third quarter of 2025.
The key rate is expected to end the year at 23%.
According to Governor Johnson Asiama, the hike in the policy rate is to re–anchor inflationary pressures in the economy.
The decision by the Bank of Ghana goes contrary to calls by economic experts for the Central Bank to maintain the policy rate at 27%.
Banking Consultant and Economic Expert, Dr Richmond Atuahene, prior to the policy rate announcement, cautioned against a premature reduction in the policy rate.
“If you look at the policy rate and inflation expectations, the expectation is very high, the macroeconomic environment is not as good as people think. Any country experiencing over 20% inflation consistently for a year is considered to be in a state of hyperinflation,” he noted.
“The governor must be very circumspect about bringing the rate down simply because Treasury bill rates have declined,” he stated. “If he does so prematurely, inflation could spiral out of control.”
