The Monetary Policy Committee (MPC) of the Bank of Ghana, by a majority decision, has raised the policy rate by 100 basis points to 28 per cent.
In addition to the adjustment in the policy rate, the Bank is implementing complementary measures to strengthen liquidity management and enhance monetary policy transmission.
Dr. Johnson Asiama, Governor, Bank of Ghana, said the Bank would introduce a 273-day instrument to augment the existing sterilization toolkit.
The Governor was speaking at the 23rd MPCs press briefing in Accra on Friday.
He said the Bank would also intensify the monitoring of banks’ Net Open Positions to ensure compliance and review the current structure of the Cash Reserve Ratio (CRR) to assess its broader impact on liquidity conditions and financial intermediation in the economy.
He said as inflation becomes firmly anchored, the Committee would reassess the scope for a gradual easing in the policy stance.
He said the Committee noted that the global environment had become more challenging, reflecting trade and economic policy uncertainty.
He said the series of tariffs announced by the U.S. administration was evolving and might have negative effects on the global economy.
He said the persistence of these external headwinds might spill over to the domestic economy through the trade and
financial channels, highlighting the need for policy to remain proactive.
He said on the domestic front, early indications point to improved growth prospects.
The Governor said the Bank’s CIEA rebounded, and the Ghana Purchasing Managers’ Index moved
above the 50-benchmark in February, implying increases in new orders by companies.
“Both business and consumer confidence have improved, and private sector credit growth was recovering and these developments suggest a positive outlook
for the economy,” he said.
Dr Asiama said the external sector outlook remained strong and this was against the backdrop of increases in gold exports driven by sustained implementation of the Gold-for Reserve programme, continued growth in remittance inflows, and commitment to the implementation of policies and reforms under the IMF programme.
He said the continued buildup of reserve buffers was expected to support the stability of the currency.
He said the banking sector had remained broadly stable and Credit risks within the banking sector, however, remained elevated, as underscored by increased non-performing loan ratios.
The Bank’s latest macroprudential risk assessment indicates some moderation in systemic risks on the back of improved solvency, liquidity, efficiency, and profitability, he said.
He said going forward, the Bank would continue to closely monitor undercapitalised banks to safeguard the stability and soundness of the banking
sector.
The Committee observed that the fiscal stance was expansionary in 2024 and this had created significant fiscal impulses, and a liquidity overhang that needs to be
carefully managed.
The strong liquidity conditions could spill over into other
segments of the economy and derail the disinflation path.
“While the government has signalled a strong commitment to fiscal consolidation, monetary policy restraint is required,” he added.
While headline inflation has declined marginally, it remains a concern, both
food and non-food inflation are significantly above expectation, and core inflation
remains elevated.
He said while food inflation was driven largely by supply side factors, preventing second-round effects from such increases would be essential.
The Governor said the persistent inflation dynamics over the past year, partly driven by both fiscal and monetary policy missteps, would require a policy reset to re-anchor the disinflation process.
“To restore price stability going forward would require a tight monetary policy stance, strong liquidity management, and commitment to the 2025 budget which seeks to reset the fiscal consolidation process,” he added.
GNA
CA/
28 March 2025
