Policy Rate increased from 24.5% to 27%

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased the policy rate by 250 basis points to 27.0 percent.

This means the cost of borrowing will further go up.

In his address to the media, Governor of the Bank of Ghana, Dr. Ernest Addison, noted that the increase forms part of efforts to address current inflationary pressures.

The next MPC meeting is scheduled for January 24 – 27, 2023. The meeting will conclude on Monday, January 30, 2023, with the announcement of the policy decision.

Below is Dr Addison’s full address:

Good morning, Ladies and Gentlemen of the Media and welcome to the press briefing after the 109th Monetary Policy Committee (MPC) meetings which took place last week. The Committee deliberated on recent macroeconomic developments and assessed risks to the inflation and growth outlook. A summary of the assessment and key considerations that informed the Committee’s decision on the stance of monetary policy is provided below:

Global growth slackened in the third quarter of 2022 and is projected to weaken further amid tight financing conditions, rising cost of living and a squeeze on real incomes, alongside recession fears in advanced economies. Furthermore, Purchasing Managers Index releases for manufacturing and services activity point to weakened momentum in the last quarter of the year. The current phase of the business cycle, coupled with elevated macroeconomic, geopolitical and policy uncertainty concerns, has led to downward revisions of global growth projections. The International Monetary Fund has revised significantly downwards, global growth to 3.2 percent in 2022, nearly half of the 6.0 percent growth recorded in 2021.

Global headline inflation remains elevated and has broadened beyond food and energy prices, with several other factors adding to inflationary pressures. These include tighter labour market conditions, the pass-through effects of currency depreciations to inflation, and supply chain cost pressures. The International Monetary Fund projects global inflation to reach 8.8 percent by the end of 2022, before gradually declining to 4.1 percent in 2024. The projected ease in global inflation is conditioned on easing supply chain constraints, slowing global economic growth, declining global food prices, and lower crude oil prices.

Global financing conditions have tightened further, reflecting in large part the aggressive policy rate increases across several Advanced Economies to reanchor the persistent rise in inflation. The US dollar has strengthened, and longerterm bond yields have risen sharply because of sustained policy tightening in response to high inflation concerns. This has triggered currency pressures and volatility in equity markets across Emerging Markets and Developing Economies. Meanwhile, stock prices remained subdued amid rising interest rates and growing uncertainty about near-term global growth prospects. In a similar policy direction, central banks in several Emerging Market and Developing Economies have tightened monetary policy in response to rising inflation and currency pressures.