The Bank of Ghana (BoG) has kept the Monetary Policy Rate at 29% for the third time in a row.
A central bank sets the policy rate as a benchmark interest rate. The interest rate that commercial banks are able to borrow from the Central Bank is this.
The Central Bank uses this rate as a tool for monetary policy in order to manage the money supply in the economy and affect short-term interest rates.
This suggests that commercial banks will continue to use a 29% reference rate for lending.
The decision to retain the rate was made public by BoG Governor Dr. Ernest Addison on Friday, following the committee’s 119th meeting.
He clarified that although inflation expectations and the majority of core inflation measures are heading lower, there is still reason for concern because of the unpredictability of the macroeconomic data.
The first quarter of 2024 had better GDP growth than anticipated. In spite of a typically strict approach on policy, economic activity was steady. The most recent GDP figures from the Ghana Statistical Service and the ensuing higher adjustment of growth estimates demonstrate this. In a similar vein, more recent high-frequency indices of economic activity point to better growth results.
“Since May, there has been a sharp decline in the value of the currency, and June 2024 saw high food prices, consumer and business confidence sentiments have weakened. The reversal of these attitudes will assist economic activity even more when macroeconomic stability and currency rate stability take root.
Although it is anticipated that inflation will stay within the target year path, there is a little upward bias to the risks. This will necessitate sticking to a strict monetary policy stance bolstered by vigorous efforts at fiscal reduction, as well as being watchful to make sure the year-end inflation targets are met.
“The Committee determined to keep the policy rate at 29 percent in light of these considerations,” he said.