The Monetary Policy Committee (MPC) of the Bank of Ghana has announced its decision to maintain the policy rate at 29.5%.
The committee cited a slowdown in inflation as the primary reason for keeping the rate unchanged, which represents the rate at which the central bank lends to commercial banks.
At a presser on Monday, May 22, Dr Ernest Addison, Chairman of the MPC and Governor of the Bank of Ghana, explained that the decision to hold the rate aims to expedite the disinflation process.
Dr Addison highlighted the significant decline in headline inflation since the beginning of the year, exceeding 12.0 per cent.
He noted that the percentage of items in the Consumer Price Index (CPI) basket with inflation rates above 50 per cent has been diminishing, indicating a strong return to the disinflation path. Core inflation has also been easing at a rapid pace, further supporting the disinflationary trend.
The governor emphasized that the tight monetary policy, including additional liquidity management operations to address excess liquidity, relative stability in the local currency, and a decrease in ex-pump petroleum prices, has played a crucial role in supporting the disinflation process.
Additionally, the Bank of Ghana has signed a Memorandum of Understanding on zero financing to the budget, aiming to eliminate fiscal dominance and facilitate a faster easing of inflation towards the target band. Dr Addison expressed confidence that these policies will act as an anchor to reinforce the disinflation process and steer the economy towards recovery.
Considering these factors, the MPC has decided to maintain the Monetary Policy Rate at 29.5 per cent, signalling the Bank of Ghana’s commitment to managing inflation and supporting the country’s economic trajectory.
Read Dr Addison’s full speech below.