The Bank of Ghana’s Monetary Policy Committee (MPC) began its 107th regular meeting yesterday, July 20, 2022, and will conclude on Friday, July 22, 2022, to review economic developments.
This meeting comes at a critical juncture in Ghana’s economic recovery, as the government seeks a program from the International Monetary Fund.
The economy has been hampered by rising debt and a large fiscal deficit, rising inflation and interest rates, and currency volatility.
This is expected to compel the MPC to devise additional monetary measures to support fiscal policy in order to help stabilize the economy.
Already, a team from the IMF had visited the country to hold meetings with the government officials including the Finance Minister, Ken Ofori-Atta, the Governor of the Bank of Ghana, Dr Ernest Addison and other stakeholders on the way forward in reviving the economy.
The Central Bank in its last meeting in May 2022 adjusted upward the policy rate by 200 basis points to 19 per cent to help check the rising inflation.
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Also, the MPC will review some business risk factors such as consumer and business confidence.
The meeting will conclude with a press conference on Monday, July 25, 2022 to announce the decision of the committee.
Already, some experts and institutions are projecting a further rise in the policy rate because the real policy rate is still negative.
According to Assistant Professor of Economics at Niagara University in New York, USA, Dr Dennis Nsafoah, he expected the policy rate to re-anchor markets expectation of the near-term inflation rate.
“The broad-based nature of the inflation rate increases the pressure on the Monetary Policy Committee (MPC) of the Bank of Ghana ahead of their next policy rate decision on July 25 to increase the policy rate for a third time this year. In as much as there is evidence of external factors such as the war in Ukraine and continued supply chain disruptions driving inflation in Ghana, a broadened inflation also indicates excess demand in the economy,” he said in an interview with Myjoyonline.com.
DrNasfoah pointed out that an increase in the interest rate would help slow demand and allow supply time to catch up.
“In January 2004, when the inflation rate was 29.0 per cent, the policy rate stood at 21.5 per cent, representing a real interest rate of -7.5 per cent. With the current policy rate of 19 per cent, history indicates the Bank of Ghana may further increase the policy rate to re-anchor inflation expectations and to prevent high inflation from becoming entrenched,” he said.
The Institute of Economic Affairs has urged the BoG to increase the Policy rate in order to control the rising inflation.
In a statement signed by its Director of Research, Dr John Kwakye, it said the upward adjustment would signal the MPC’s unwavering commitment to fighting the inflation and bring it under control.
“The adjustment will also send the right signal to, and help calm, the markets,” it added.
Furthermore, the policy think tank explained that the next meeting of the MPC in September 2022, when the Committee would have had the benefit of two more inflation readings in July and August, would give it a clearer sense of the trend for it to reposition the policy rate accordingly.
