According to a Daily Graphic report, the Bank of Ghana is planning to increase its main benchmark interest rate by more than 150 basis points, from 27 to about 28.5 percent, in an effort to rein in spiraling inflation and clean up the currency rate market.
As the Monetary Policy Committee of the central bank begins its 110th meeting to assess the state of the economy and decide where to set its policy rate, this is anticipated to increase the cost of borrowing and lessen pressure on the exchange rate market.
When that information is revealed on January 30, nothing will come as a surprise. Graphic Business predicts that MPR will rise from its present level of 27%, which is already a record high, one more time.
The scale of the upcoming major interest rate hike is the only question that needs to be answered.
The BoG followed the prescribed course of action throughout 2022, tightening monetary policy each time it met (every two months) in response to similarly persistently rising consumer price inflation, which was itself sharply fueled by severe cedi depreciation as the closure of international capital markets to Ghana, combined with net outflows of foreign investment capital in cedi denominated domestic debt securities, completely overcame the country’s trade surpluses.
Consumer price inflation was 13.9 percent in January 2022; by December 2022, it had increased to 54.2 percent, which was the steepest level in over four decades.
This was due to a concurrent rise in the BoG’s core inflation rate, which does not include energy costs or utility rates. It increased from 13.3% in January to 39.7% by October, roughly matching consumer price inflation for that month.
So, the BoG continued tightening monetary policy through MPR increases throughout the year, raising it from 14.5 in January to 27 in November, when the MPC convened for the final time in 2022, in accordance with its primary objective of containing inflation.
