October 6, 2022

BoG Increases Monetary Policy Rate To 24.5%

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has again increased the Monetary Policy Rate (MPR) by 250 basis points.

This follows the increment from 19% to 22% during an emergency MPC meeting in August.

The Policy rate now stands at 24.5% after the 108th MPC meeting held this week.

The BoG cited the strengthened US dollar, below-expectation revenue, cedi outlook and inflation for the decision.

“Against other major international currencies, the US Dollar has appreciated by some 15 per cent. Consequently, global financing conditions have tightened further since the start of 2022, with spillovers in the financial markets of emerging markets and developing economies.

“…On the fiscal situation, while expenditures have been broadly on target, revenue performance has been below expectations, complicating fiscal policy implementation. Financing of the budget so far has predominantly been from the banking sector with the central bank absorbing a larger share. Persistent uncovered auctions and portfolio reversals by non-resident investors continue to pose risks to financing of the budget, resulting in monetization of the budget deficit by the central bank.

“…Inflation remains elevated and the balance of risks is on the upside. Although the forecasts are for monthly inflation to continue to slow down, the risks are on the upside, emanating largely from pass-through effects of the currency depreciation, the recent upward adjustment in utility tariffs, and rising inflation expectations”, it justified.

“Under the circumstances, the MPC decided to increase the Monetary Policy Rate by 250 basis points to 24.5 percent”, it concluded.

In August 2022, the MPC held an emergency meeting which adopted three measures to address the cedi depreciation then.

Among the measures, the BoG increased the Monetary policy rate by 33 basis points following a decision to keep it at 19.0% during the MPC’s 107th meeting in July.

The second measure was to raise the primary reserve requirement of banks from 12 per cent to 15 per cent.

The last measure announced by the BoG was to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining firms and oil and gas companies.

Source: opmesuo.com/Hajara Fuseini

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