BoG policy rate remains elevated as MPC hikes rate by 250bps; now 27%
The Central Bank has once again increased its monetary policy rate by 250 basis points (2.5%).
On the back of the increment, the Bank of Ghana’s monetary policy rate rises to 27% from the previous rate of 24.5%
Cumulatively, the policy rate hikes by the Central Bank since November last year, comes to some 1,250 basis points (12.5%).
The hike in policy rate by the BoG is on the back of the increment in the country’s headline inflation rate which hit a record high of 40.4% in October.
Given the hike in policy rate, interest rates on loans to the private sector is expected to increase, further making costs of production by businesses in the country more expensive.
Announcing the new policy rate, the Governor of the Central Bank, Dr Ernest Addison, noted the Bank’s decision to increase the policy rate is due to significant upside risks to the country’s headline inflation as inflation is expected to remain elevated in the short term.
“Inflation jumped in October 2022 to 40.4 percent and has dragged along with it, core inflation, which is almost at par with headline inflation and indicating significant underlying inflation pressures and upside risks to the inflation outlook.
“The inflation forecast shows that in the outlook, inflation will likely peak in the first quarter of 2023 and settle at around 25 percent by the end of 2023. This forecast is conditioned on the continued maintenance of tight monetary policy stance and the deployment of tools to contain excess liquidity in the economy.
“There are however some risks to this forecast that would have to be monitored, including additional pressures from the proposed VAT increase, and exchange rate pressures. Continued vigilance to the evolution of these potential price pressures in the outlook will be key.
“The Committee is of the view that significant upside risks to the inflation outlook remain. To continue to anchor inflation expectations, the Committee therefore decided to increase the policy rate by 250 basis points to 27.0 percent,” Governor Addison.
