Ghana increases its policy rate to cushion inflation

Ghana’s central bank on Monday announced a further 150 basis points (bps) hike in its benchmark lending rate to 29.5 percent to curtail the country’s high inflation.

Ernest Addison, governor of the Bank of Ghana, made the announcement at a press briefing after the bank’s 111th Monetary Policy Committee (MPC) meeting, saying the further hike was necessary because the inflationary pressures have remained relatively high.

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

He also said the MPC has decided to increase the cash reserve ratio on domestic currency deposits for commercial banks to 14 percent from the previous 12 percent to help curb inflation.

“In addition, the bank will step up liquidity management operations to address excess liquidity conditions in the market and continue to monitor developments in the banking sector to deploy other macroprudential tools to ensure financial stability,” added the governor.

Ghana’s once-thriving economy has experienced ballooning inflation, a high budget deficit, and fast depreciation in foreign exchange, with its associated hardships on citizens since late 2021, and its central bank has maintained a firm monetary policy stance since then. Enditem