Bank of Ghana Raises Policy Rate to 28% Amidst Economic Uncertainty
By: Praisebell Rosmond Larbi
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased the policy rate by 100 basis points to 28%. This decision was announced by Governor Dr. Johnson Asiama during the 123rd MPC press conference in Accra.
According to Dr. Asiama, the global economic environment has become increasingly challenging, with the disinflation process stalling in some countries. Despite this, Ghana’s economy is showing signs of improvement, with growth prospects looking up and business and consumer confidence on the rise.
However, inflation remains a concern, sticking around 23% despite easing slightly. The MPC aims to re-anchor the disinflation process with this policy rate hike. Dr. Asiama noted that the committee’s decision was influenced by several factors, including; Global Economic Uncertainty; Rising trade tensions, geopolitical risks, and weakening global demand. Also, Inflationary Pressions; Persistent food inflation, high non-food inflation, and sticky inflation expectations. Fiscal Policy Stance, expansionary fiscal policy in 2024, with a deficit exceeding program targets, not leaving financial Conditions; this evolves financial conditions, with increased liquidity, concerns about capital requirements, and modest private sector credit growth.
Dr. Asiama emphasized that the MPC must carefully assess the macrofinancial implications of these factors, particularly with respect to inflation, foreign exchange demand, and credit growth. He also noted that the banking sector’s performance remains strong, with sustained growth in total assets, investments, and deposits.
The Governor acknowledged that Ghana’s economy faces deeper structural issues, including underinvestment in agriculture, persistent exchange rate misalignments, and the need to deepen domestic financial markets. However, he emphasized that the MPC’s primary focus is on maintaining price stability and supporting sustainable growth. Dr. Asiama stated that the MPC’s decision to raise the policy rate to 28% is aimed at reinforcing the disinflation process and supporting Ghana’s economic growth. The committee will continue to monitor economic developments and adjust its policy stance as needed.
