We’ll keep monetary policy rate steady at 27% – BoG
Story: Isaac AIDOO, Accra
THE Bank of Ghana (BoG) has announced its decision to keep the monetary policy rate steady at 27%, citing the need for clarity on the government’s forthcoming economic policy agenda.
Addressing journalists in Accra, Governor of the BoG, Dr. Ernest Addison, noted that future inflation forecasts and other key economic indicators will largely depend on the yet-to-be-formulated economic policy framework.
Dr. Addison stated, “we have to make some assumptions that we will continue on the fiscal consolidation path, and the budget that will be crafted will respect the parameters under the IMF programme.”
He further noted that adherence to the said parameters would align inflation trends with the central bank’s projections.
The BoG’s current inflation target is set within a medium-term objective of 8 ±2 percent. To achieve this, the Governor indicated that the central bank is committed to maintaining a tight monetary policy stance until inflation is on a firmly declining path.
The approach is in line with the objectives outlined in Ghana’s programme with the International Monetary Fund (IMF), which aims to bring inflation back to the 6-10 percent target range by the end of the programme.
Dr Addison explained that a key component of this strategy is the Monetary Policy Consultation Clause within the IMF programme.
The clause establishes a framework for discussions between the BoG and the IMF, particularly when inflation deviates from agreed-upon targets. With the recent inflation rate reaching 23.8%, Dr. Addison noted that the figure “puts us just on the boundary of the outer band,” necessitating consultations with the IMF to determine appropriate policy measures to guide inflation back to the desired single-digit trajectory.
The Governor also addressed factors contributing to current inflation trends, noting the significant impact of food prices, supply chain disruptions, and transportation costs. He acknowledged that structural issues, including climate change effects on food production, have played a role in driving up prices.
Looking ahead, Dr. Addison stressed the importance of the upcoming government budget, expected in March, which will provide greater insight into the nation’s economic policy direction.
He expressed optimism that continued fiscal consolidation and adherence to IMF programme parameters will support the BoG’s efforts to achieve its inflation targets and maintain economic stability.
The BoG observed that inflation profile remained elevated, largely driven by food price movements, especially in the last quarter of the year.
“The climate-related factors including the dry spell in some parts of the food-growing regions of the country and the late onset of rains, negatively affected production, while supply chain weaknesses generally affected food prices. While the inflation outturn for the year 2024 5 deviated from target, it is expected that the disinflation process will resume, contingent on renewed efforts at fiscal consolidation, which is anticipated in the new administration’s economic policy agenda and the yet-to-be-presented 2025 budget statement,” Dr Addison stated. According to him, the Bank’s latest inflation forecast showed a steady decline and return to the path of disinflation, with an extended time horizon of achieving the medium term target of 8±2 percent.
