BoG Sets Policy Rate At 29.5%

The Bank of Ghana (BoG) has increased the Monetary Policy Rate (MPR) from 28% to 29.5%.

Policy rate hike is used to control inflation. It encourages savings and reduces spending by the public.

The decision was taken during the 111th Monetary Policy Committee (MPC) meeting last week in spite of the decline in inflation for two consecutive months since January 2023.

The Central Bank indicated that despite the decline, inflation remains relatively high compared to the medium-term target and therefore the decision.

It explained, “to place the economy firmly on the path of stability and reinforce the pace of disinflation it is important that the monetary policy stance be tuned further to re-anchor inflation expectations towards the medium-term target”.

In addition to that the Committee anticipated that Ghana’s economy still faces relatively tight global financing conditions, emerging risks in the global financial system, and heightened uncertainty about the global economic outlook whose effect on the economy could “be amplified by inherent vulnerabilities, including structural excess liquidity following the DDEP”.

Also, it noted that pre-pandemic capital buffers in the banking sector have been weakened somewhat by the recent macroeconomic challenges and the Domestic Debt Exchange Programme (DDEP) and therefore require regulatory reliefs to contain potential risks to financial stability.

Other Measures
In addition to the hike in the policy rate, the BoG also announced it has reset the Cash Reserve Ratio on domestic currency deposits for banks from 12 per cent to 14 per cent which takes effect from April 13 this year and liquidity management operations.

It said the liquidity management operations will help address excess liquidity conditions in the market.

“The Committee will continue to monitor developments in the banking sector and deploy other macroprudential tools to ensure financial stability”, it said.

Source: opemsuo.com/Hajara Fuseini