BoG Maintains Monetary Policy Rate At 29%

Dr. Ernest Addison

In a recent announcement, the Bank of Ghana (BoG) has decided to maintain its Monetary Policy Rate (MPR) at 29%.

This move comes in response to a warning from the International Monetary Fund (IMF) cautioning central banks to be cautious when cutting interest rates, as looser monetary policy could potentially lead to an increase in inflation.

This marks the first time in 2024 that the BoG has decided to keep the rate unchanged. During its 117th monetary policy announcement on Monday, March 25, 2024, Dr. Ernest Addison, the Governor of the Bank of Ghana, highlighted the importance of closely monitoring the current inflation trend, as risks continue to remain elevated.

Dr. Addison acknowledged that external sector conditions have remained positive, with improving reserve buffers.

However, the exchange rate faced significant pressure in the initial months of the year. Despite this, the banking sector has remained stable, even with the elevated credit rates.

He also mentioned that banks’ liquidity and profitability positions have shown continuous improvement. More than half of the 23 banks in the country have fully capitalized and do not require any recapitalization. Additionally, the majority of remaining banks have met more than two-thirds of the required capitalization within one year, which aligns with the end of 2023.

Furthermore, Dr. Addison emphasized that fiscal policy implementation has been consistent with the targets set under the IMF support program. While the primary fiscal balance target for 2023 was achieved, close attention will be given to ensure effective commitment control in 2024.

In terms of inflation, there has been a slowdown in the first two months of 2023. However, the latest inflation forecast indicates a slightly elevated profile. This will be closely monitored by the Bank of Ghana as they continue to assess the situation.

The BoG’s decision to maintain the Monetary Policy Rate reflects its cautious approach in the face of potential risks. With the IMF warning central banks to be vigilant in cutting interest rates, the BoG is exercising prudence in order to ensure stable economic conditions and mitigate the risk of increased inflation.

By Vincent Kubi