Dr Johnson Asiama
The Monetary Policy Committee (MPC) of the Bank of Ghana has increased the policy rate from 27% to 28% due to an elevated core inflation driven by both fiscal and monetary missteps.
According to the committee, while headline inflation has declined marginally, it remains a concern as both food and non-food inflation are significantly above expectations.
Governor of the Bank of Ghana, Dr. Johnson Asiama who announced this at the 123rd press briefing at the Bank Square stated that the persistent inflation dynamics over the past year, partly driven by both fiscal and monetary policy missteps, will require a policy reset to re-anchor the disinflation process.
“To restore price stability going forward will require a tight monetary policy stance, strong liquidity management, and commitment to the 2025 budget which seeks to reset the fiscal consolidation process”.
“Under the circumstances, the Committee, by a majority decision, decided to raise the Monetary Policy Rate by 100 basis points to 28.0 percent to re-anchor the disinflation process,” he said.
He said the global environment has become more challenging, reflecting trade and economic policy uncertainty while a series of tariffs announced by the U.S. administration is evolving and may have negative effects on the global economy.
“Inflation remained high in 2024 and sticky around 23%, significantly higher than expectation. The latest data released by the Ghana Statistical Service indicates that headline inflation eased marginally from 23.8% in December 2024 to 23.1% in February 2025, due to easing but still high non-food inflation”.
The governor also stated that on the domestic front, growth continued to rebound, exceeding initial expectations.
He noted that provisional data from the Ghana Statistical Service estimated real GDP growth at 5.7% in 2024, higher than the programmed growth rate of 4.0% for 2024, and the 3.1% recorded in 2023.
Dr. Asiama also pointed out that the Bank’s main core measure of inflation eased marginally in the first two months of 2025 as inflation, excluding energy and utility items from the consumer basket, eased from 23.1% in December 2024 to 22.4% in February 2025 compared with 24.0% in the same period last year.
“The Bank’s real sector indicators point to a sustained improvement in economic activity, amid significantly improved business and consumer sentiments. The updated Composite Index of Economic Activity (CIEA) rose by 5.7% year-on-year in January 2025, relative to 3.5% in the same period of 2024, driven by increased consumption, international trade activities, and private sector credit growth,” he added.
Dr. Asiama, however, indicated that despite the drop in inflation in the first two months of 2025, the latest inflation expectations, as derived from the Bank’s yield curve and surveys model point to a softening of expectations, though above the medium-term target.
The Governor further stated that “as inflation becomes firmly anchored, the Committee will reassess the scope for a gradual easing in the policy stance”.
By Ebenezer K. Amponsah