BoG Holds Policy Rate at 14% as Inflation Risks Remain Balanced
The Bank of Ghana has maintained its Monetary Policy Rate at 14.0 percent following the 130th meeting of the Monetary Policy Committee (MPC), citing balanced risks to inflation and economic growth despite growing geopolitical uncertainties.
Announcing the decision at the MPC press briefing on Wednesday, Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, said the committee considered both external and domestic developments before deciding to keep the benchmark interest rate unchanged.
According to the Governor, heightened geopolitical tensions in the Middle East continue to weaken the global growth outlook and increase policy uncertainty, with potential spillover risks to Ghana’s economy through trade and financial channels.
He explained that while inflation has begun rising again in some advanced economies, the transmission effects on the domestic economy through exchange rate channels have so far remained muted.
Dr. Asiama noted that Ghana’s domestic economy continues to recover steadily, supported by strong economic activity indicators during the first quarter of the year. He said growth is expected to remain robust, aided by expanding private sector credit.
However, he cautioned that commodity price volatility and possible supply chain disruptions remain key downside risks to growth.
On inflation developments, the Governor said headline inflation remains below the lower bound of the medium-term target band, although both headline inflation and inflation expectations have recorded marginal increases in recent months.
He added that core inflation continues to decline, signalling a sustained easing in underlying inflationary pressures.
“The latest forecast suggests that inflation is expected to trend upward into the medium-term target band, largely due to base drift effects related to exchange rate movements, food supply conditions and transport fares,” Dr. Asiama stated.
The MPC also identified several upside risks to the inflation outlook, including the possibility of prolonged tensions in the Middle East pushing crude oil prices above 100 dollars per barrel, which could feed into higher domestic fuel prices, transport fares and utility costs.
Additionally, the committee warned that Ghana’s quarterly utility tariff adjustment mechanism could place further pressure on non-food inflation in the coming months.
Despite these concerns, the Governor said relative exchange rate stability, improving reserve buffers and continued fiscal discipline are expected to help contain inflationary pressures.
“Based on the above considerations, the committee assessed risks in the outlook to inflation and growth as broadly balanced and decided to maintain the monetary policy rate at 14.0 percent,” he said.
The MPC further assured that it will continue to monitor incoming economic data closely, particularly the potential effects of geopolitical tensions on the domestic economy, and take appropriate policy actions when necessary.
