MPC hikes policy rate to 19%
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased its monetary policy rate to 19% from the previous rate of 17%.
The policy rate hike marks an increment of 200 basis points.
The hike in the policy rate was announced by Governor of the Bank of Ghana, Dr Ernest Addison on Monday, May 23, 2022.
With the increment in the policy rate, lending rates by commercial banks to businesses are expected to increase in line with the new policy rate.
The monetary policy rate is the interest rate at which the Central Banks makes loans to commercial banks and serves as the benchmark interest rates for onward loans to businesses in the country.
Following the Bank’s 106th Monetary Policy Committee (MPC) meeting, the Governor attributed the Committee’s decision to increase the policy rate to continued elevated inflation profile in the near term with a prolonged rising for inflation to return to the target band.
“Both headline and core inflation have stretched further above the upper limit of the bank’s medium term target band. The heightened uncertainty surrounding the inflation dynamics has weighed heavily on the domestic environment and significantly depressed business and consumer sentiments. inflation data show that well food inflation has accounted for the increases in inflation over the past year.
“The recent jump in April shows that relative price increases in the non food sector is accelerating the fast which provides information on the extent to which prices are becoming embedded. The bank’s latest forecast shows a continued elevated inflation profile in the near term with a prolonged rising for inflation to return to the target.
“Inflation expectations by consumers businesses and the banking sector have also heightened the risks to inflation, outlook on the upside and emanate from the availability of inputs for food production. In quarter inflation, continued upward adjustment in petroleum prices and transportation was only increases in utility tariffs and potential integration. The second round effects these price adjustments would further amplify inflation pressures.
“These considerations showed that with a strong rebound in the closing of the negative outlook, the balance of risks is clearly on inflation.
“The MPC took the view that it needed to decisively address the current inflationary pressures to re anchor expectations and help foster macroeconomic stability on the on the basis of the above assessment. The committee decided to raise the policy rate by 200 basis points to 19%,” he stated.
