Steve Hanke, a professor of applied economics at Johns Hopkins University, expects interest rates in Ghana will rise despite the Bank of Ghana’s Monetary Policy Committee’s decision to maintain the Policy Rate (PR) at 19%.
At the MPC press conference in Accra on Monday, July 25, Governor of the BoG Dr. Ernest Addison said that the rate would remain at 19 percent.
He explained that the decision was made to let the central bank continue to monitor how the earlier announced policy measures to address the economic issues will turn out.
The BoG Chief reported that the Committee has noted that the inflation rate has continued to rise.
A detailed review of the consumer basket showed that although initially driven by supply side shocks, the initial relative price changes had broadened to almost all the items in the consumer basket.
“Over 80 percent of the items in the basket recorded inflation above 20 percent,” Dr Addison said.
Inflation perceptions and expectations, as revealed in the Bank’s surveys of consumers and businesses, have increased, and influenced agitations for Cost-of-Living Allowances in workplaces
“The Bank of Ghana has responded decisively with its policy tools over the last few months increasing the policy rate by a cumulative 550
basis points since November 2021 and tightened liquidity conditions. The Committee also noted the deceleration in the rate of increase in
inflation in the last reading.
“The Committee expects that the macroeconomic framework that will underpin an agreed IMF supported programme will present a stronger coordinated monetary and fiscal policy framework that will anchor stability and prevent a wage-price spiral, which will lead to inflation becoming more entrenched.
“The Committee was of the view that it will be appropriate to pause and observe the impact of the recent monetary policy measures already taken. The committee therefore, has decided to maintain the Monetary Policy Rate at 19 per cent,” Governor Addison said.
Reacting to this in a tweet, Prof Hanke indicated that “The Bank of Ghana halted interest-rate hikes on signs inflation is “leveling off.” GHA’s official inflation is 29.8%/yr—a 19 yr high. Not even close.
” Today, I measure inflation at 54%/yr, ~1.8x the phony official rate. So, interest rates will go higher.”
