BoG maintains rate, says no fixed target for cedi

By Praisebell Rosemond Larbi

The Governor of the Bank of Ghana, Dr. Johnson Asiama, has clarified that the Central Bank does not have a fixed target rate for the appreciation of the cedi, despite its recent strong performance against major foreign currencies.

Addressing journalists after the Monetary Policy Committee (MPC) meeting in Accra, Dr. Asiama said the Bank’s approach is to prevent excessive volatility, not to defend a specific exchange rate.

“We don’t have a policy in place that triggers a response once the cedi hits a particular level. Our concern is with extreme depreciation or appreciation, and we act only to prevent disruptions,” he said.

He added that the Bank is closely watching the real effective exchange rate and overall market dynamics. “You may see some swings, but our focus is to ensure they are not excessive,” he said.

Responding to speculation that the cedi’s strength is being fueled by reserve depletion, Dr. Asiama rejected the claim. He said the appreciation is underpinned by solid reserves, sound monetary policies, and improved investor confidence.

“The cedi’s current performance reflects strong fundamentals of our international reserves, robust monetary policy stance, and positive sentiment from both domestic and foreign investors,” he said.

He also pointed to improving market sentiment as a critical factor. As of the end of April 2025, Ghana’s international reserves stood at $10.6 billion, equivalent to 4.7 months of import cover. The cedi has appreciated by 24.1% against the US dollar this year.

On public concerns that the stronger currency is yet to result in lower prices of goods and services, the Governor urged patience, indicating that competitive pressures in the retail space may eventually drive down prices.

BoG Maintains 28% Policy Rate, Revises Reserve Rules

The Bank maintained its benchmark policy rate at 28 percent and announced a key change to the cash reserve ratio framework. All banks are now required to hold reserves in the same currency as the deposits—foreign currency reserves for foreign currency deposits and domestic currency reserves for cedi deposits.

Dr. Asiama said this adjustment aims to improve liquidity management and enhance the transmission of monetary policy.

Private Sector Credit Shows Signs of Recovery

The Governor also noted signs of a rebound in private sector credit, buoyed by a steady decline in the Ghana Reference Rate. “We will continue with current measures to support credit flow to the private sector,” he said.

Inflation Target Within Reach

The Central Bank remains confident of achieving its 12% end-of-year inflation target for 2025, despite external pressures.

Dr. Asiama expressed optimism that Ghana could return to single-digit inflation by the first quarter of 2026. “Looking at current developments and the policy measures in place, we are on track,” he said.

No Upper Limit on Reserves, Lower Bound Maintained

On Ghana’s reserve management strategy, Dr. Asiama clarified that while there is no formal upper limit, the Bank maintains a lower threshold of three months of import cover. “What we have now is adequate and provides the necessary buffer to meet external obligations,” he said.