Policy rate unchanged at 27% as BoG focuses on inflation and currency stability

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

This move aims to stabilize inflation expectations and manage exchange rate fluctuations amid ongoing economic uncertainties.

In a statement issued on Friday (29 November) the MPC explained that despite some progress in inflation control, rising food prices, previous exchange rate pressures, and adjustments in fuel prices and utility tariffs have created challenges.

“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 committee noted.

The committee also highlighted concerns over economic instability related to the upcoming elections and a surge in demand for foreign currency, which has temporarily shifted the exchange rate from its economic fundamentals.

However, it expects the cedi to continue rebounding as election-related uncertainties subside and the central bank bolsters its foreign exchange reserves.

While current monetary policy measures align with the ongoing IMF program, the MPC emphasized the importance of preventing further depreciation of the cedi, which could affect long-term inflation expectations.

The committee revised its inflation forecast, now predicting a slight increase to 20.1% over the next year, with inflation expected to return within the target range of 6-10% by Q4 2025.

The decision to maintain the policy rate was made after considering the recent uptick in inflation—22.1% in October 2024, compared to 21.5% in September, driven by both food and non-food inflation.

The government’s year-end inflation target of 15% now faces elevated risks as the year draws to a close.

Reporting By Jonathan Ofori, Asaase Newsroom

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