Bank of Ghana Raises Policy Rate to 28.0% to Combat Inflation

The Monetary Policy Rate was raised by the Bank of Ghana (BoG) by 100 basis points, to 28.0%. The central bank’s larger plan to control inflation and maintain economic stability in the face of mounting international uncertainty includes this move. According to Dr. Johnson Asiama, governor of the Bank of Ghana, the action is intended to support the nation’s disinflationary process and maintain a declining trend in inflation. He emphasized that trade policies and changes in key economies like China and the United States have created uncertainty in the world economy, making it more unstable.

“The recent series of tariffs introduced by the U.S. administration continues to evolve and could have adverse effects on the global economy. These developments have already led to downward revisions in GDP growth projections for the two largest economies, which could, in turn, slow down global growth,” Dr. Asiama noted.

Additionally, he clarified that although disinflation is slowing down in certain nations, central banks’ careful monetary policy easing has kept financial conditions tight. Dr. Asiama issued a warning that Ghana’s economy may be significantly impacted by these external economic forces through trade and financial channels. He underlined the necessity of proactive policy measures to reduce potential hazards in light of this.

“The persistence of these external headwinds may impact the domestic economy, underscoring the necessity of maintaining a forward-looking monetary policy stance,” he said.

Additional Policy Measures

The Bank of Ghana is taking a number of supplementary actions in addition to the rate adjustment in order to enhance liquidity management and boost monetary policy’s efficacy. These consist of: To supplement the current sterilizing toolbox, a 273-day financial instrument was introduced. heightened oversight of banks’ Net Open Positions (NOPs) to guarantee adherence to legal and regulatory requirements. an analysis of the existing Cash Reserve Ratio (CRR) structure to assess its wider implications on the economy’s liquidity and financial intermediation. As inflation stabilizes, the Bank of Ghana reiterated its intention to review the policy stance and may take into account a future progressive easing of monetary policy.

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Source: Citinews