MPC hikes policy rate by 50bps; now 30%
The Central Bank has increased its monetary policy rate by 50 basis points to 30%.
Policy rate hikes by the Central Bank since November last year stands at a cumulative figure of 1,300 basis points (13%).
The MPC’s decision to increase the policy rate is on the back of the marginal increase in the country’s headline inflation rate from 42.2% in May to 42.5% at end-June 2023.
The BoG’s decision to hike is in line with the monetary policy tightening stance proposed by the IMF in the implementation of the ECF programme.
Given the marginal increase in the policy rate, interest rates on loans to the private sector is expected to also increase marginally with additional increments in interest on loans and as such increments in the costs of production by businesses in the country.
Announcing the new policy rate, the Governor of the Central Bank, Dr Ernest Addison noted that risks to the inflation profile are judged to be elevated driven by second round effects of food prices, adding that inflation has persistently hovered around 42% throughout the second quarter of 2023 even though central bank financing has been eliminated in the first six months of the year.
According to him, Ghana’s macroeconomic framework requires decisive tightening from both the fiscal and monetary side to anchor inflation expectations firmly on a declining path.
“Given these considerations and under the current circumstances, the Committee has decided to increase the Monetary Policy Rate by 0.5 percent to 30 percent. In the coming months, the committee will monitor closely incoming inflation data and will respond appropriately, if needed, should inflation persist,” he noted.
