The Bank of Ghana has increased its policy rate by 150 basis points to 29.5 per cent to help check the high inflation and any downside risks to the economy.
Announcing the development at a news conference in Accra yesterday, the Governor of the Bank of Ghana, Dr Ernest Addison, said the ease in price pressures abroad would likely impact positively on Ghana’s domestic inflation profile going forward.
“Headline inflation has declined marginally for two consecutive months, but continues to remain relatively high compared to the medium-term target of 8±2 percent. To place the economy firmly on the path of stability and reinforce the pace of disinflation, it is important that the monetary policy stance be tuned further to re-anchor inflation expectations towards the medium-term target. Given these considerations, the MPC decided to increase the Monetary Policy Rate by 150 basis points to 29.5 percent”, he said.
He said the recent Domestic Debt Exchange Programme (DDEP) had impacted negatively on banks, hence the need for the Central Bank to make necessary adjustments to its regulatory requirements to support the banks.
“Whiles the domestic economy still faces relatively tight global financing conditions and heightened uncertainty about the global economic outlook, the effects of these could be amplified inherent vulnerabilities, including structural and excess liquidity following the DDEP and the widening negative outlook gap,” he said.
He, however, said the banks remained strong, sound and stable based on its recent stress test.
He added that the Monetary Policy Committee of the Bank of Ghana would continue to monitor developments within the banking industry to reduce the downside risks to the economy.