Bank of Ghana Maintains Policy Rate at 27% Amid Economic Uncertainties

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has decided to keep the policy rate unchanged at 27%, following a reduction from 29% in September 2024.

The move, announced on 29 November 2024, aims to stabilize inflation expectations and manage fluctuations in the exchange rate, as the country continues to face economic uncertainties.

In its statement, the MPC acknowledged some progress in controlling inflation but highlighted the persistent challenges posed by rising food prices, previous exchange rate pressures, and recent adjustments in fuel prices and utility tariffs. The committee noted that steep price increases in food items, combined with a depreciating currency earlier this year, have disrupted the inflation trajectory and stalled the disinflation process.

“The price increases in food items have been steep, and coupled with a depreciating currency earlier this year, they have altered the inflation trajectory and stalled the disinflation process,” the statement read.

The MPC also expressed concerns about potential economic instability linked to the upcoming 2024 elections, as well as a surge in demand for foreign currency, which has temporarily impacted the exchange rate, deviating from its economic fundamentals. However, the committee expects the cedi to continue its rebound as election-related uncertainties subside and as the central bank strengthens its foreign exchange reserves.

While the current monetary policy measures align with the ongoing IMF program, the committee stressed the importance of preventing further depreciation of the cedi, as this could negatively affect long-term inflation expectations.

The MPC revised its inflation forecast for the year, now projecting a slight increase to 20.1% over the next 12 months. The committee expects inflation to return to the target range of 6-10% by the fourth quarter of 2025.

The decision to maintain the policy rate was influenced by the recent uptick in inflation, with October 2024 inflation reaching 22.1%, up from 21.5% in September. Both food and non-food inflation contributed to this rise, putting additional pressure on the government’s year-end inflation target of 15%, which now faces increased risks as the year nears its close.