The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) on Monday (25 July) maintained the policy rate at 19% amid increases in oil and food prices.
The MPC earlier on Monday (23 May 2022) raised the policy rate by 200 basis points to 19% amid increases in oil and food prices.
But speaking at the 107th MPC press briefing in Accra, the Governor of the Bank of Ghana, Dr Ernest Addison, said the latest move is expected to control rising inflation and check the rapid depreciation of the cedi as well as rising food prices.
He said, “Overall, the Committee noted the significantly more challenging global context as the global economy is expected to experience sharp deceleration. Amid higher commodity prices, supply disruptions, inflation has surged across most countries. Global financial conditions have tightened and borrowing costs have increased particularly for emerging market and developing economies (EMDEs).”
“The slowdown in advanced economies is resulting in spillovers to EMDEs which have not fully recovered from the COVID pandemic, amplifying the effects of pre-existing headwinds to growth including from higher inflation, tightened financial conditions, and weakened demand.”
“Fiscal authorities in EMDEs, including Ghana, will be affected by the tighter financing conditions, higher borrowing costs amid elevated debt levels. This will require reprioritization of existing spending programmes to ensure fiscal and debt sustainability,” Dr Addison added.
The MPC noted that akin to the slowdown in global growth, domestic growth is moderating, as high inflation, supply bottlenecks, and exchange rate uncertainty act as a drag on economic activity. The
softening of business and consumer confidence since the last quarter of 2021 and the measured CIEA growth are providing evidence of this slowdown.
The MPC also noted the technical staff projection that GDP growth will likely slow down to within 3.7%- 4.5% from the projection of 5.8% for 2022.
He added, “Based on the above assessments, the Committee was of the view that it will be appropriate to pause and observe the impact of the recent monetary policy measures already taken. The Committee therefore decided to maintain the monetary policy rate at 19.0%.”