BoG assesses 14% policy rate as inflation rises, reserves fall – Dr. Asiama

The Bank of Ghana’s Monetary Policy Committee (MPC) is considering whether to maintain the Monetary Policy Rate at 14% as it assesses rising inflation, a weakening external position and the impact of global economic developments on Ghana.

Governor Dr. Johnson Pandit Asiama said the 132nd MPC meeting will determine whether the balance of risks has shifted enough to warrant a change in the current monetary policy stance.

“The Committee’s task during this meeting is to judge whether the balance of risks has shifted enough to warrant a different policy response, or whether there remains a case for still maintaining the policy rate at its current level,” he said.

At its 131st meeting in July, the MPC unanimously maintained the policy rate at 14%, judging that the stance remained appropriate to guide inflation back into the target band while allowing the Bank to assess how previous policy decisions were transmitting through the economy.

Dr. Asiama said that transmission was still ongoing, particularly following the revision to the cash reserve ratio regime, with banks continuing to reallocate resources.

The inflation outlook is also among the key issues before the Committee. Headline inflation rose from 3.2% in March to 5.0% in August, although it remains below the lower bound of the Bank’s 8±2% target band.

The Governor said the MPC must determine whether the expected rise in inflation in the coming months would be a temporary adjustment driven by higher energy prices and administered tariffs or the beginning of more persistent pressure on inflation expectations.

The Committee is also monitoring Ghana’s external position, with gross international reserves falling to US$11.07 billion, equivalent to 4.2 months of import cover.

Dr. Asiama said the weaker current account, declining reserves and a pause in gold exports by GoldBod since mid-August required careful attention ahead of the expected increase in foreign exchange demand in the fourth quarter.

Fiscal developments will also factor into the MPC’s deliberations, with government spending expected to rise, a growing share of short-term domestic debt and higher debt-service obligations following the completion of the external debt restructuring.

The Governor said the Committee would rely on staff presentations and its deliberations to determine whether the current policy rate remains appropriate.