by Elorm Desewu
The Monetary Policy Committee of the Bank of Ghana, (BoG) is expected to hold the policy rate at 27 percent largely due to rise in inflation and the depreciation of the cedi.
The cedi has depreciated against the American green back for some weeks now and it’s currently trading at GHC17.20 and GHC16.30 to the dollar on the retail and interbank markets respectively.
The MPC would commence its bi-monthly meeting this week to assess the economic conditions in the country and risks to the inflation outlook, after which a policy decision would be made on positioning the MPR. Each decision signals a monetary policy stance of tightening (increase), easing (decrease) or no change (stay put).
Economists are of the view that the central bank would like to hold the policy rate at 27% to effectively steer inflation downward.
Ghana’s consumer inflation opened new tab rose for the second month in a row in October, to 22.1% year on year from 21.5% in September. This means that the overall prices of goods and services increased slowly by 22.1% between August 2023 and August 2024.
To achieve the objective of price stability, Bank of Ghana was granted operational independence to use whichever policy tools it sees appropriate to stabilise inflation around the target band.
The Bank of Ghana’s framework for conducting monetary policy is Inflation Targeting (IT), in which the central bank uses the Monetary Policy Rate (MPR) as the primary policy tool to set the monetary policy stance and anchor inflation expectations in the economy.
The MPC is a statutorily constituted body established by the Bank of Ghana (Amendment) Act, Act 2016 (Act 918) to formulate monetary policy. The MPC consists of seven members – five from the Bank of Ghana (including the Governor who is the Chairman) and two external members appointed by the Board of the Bank.
