Dr. Ernest Addison
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased the policy rate from 14.5 to 17 per cent.
This is the first time the Central Bank has increased the key rate by 250 basis points since November 2021.
Governor of the Central Bank, Dr. Ernest Addison, upward review of the rate to the sharp rise in inflation adding that the new rate is to help check it.
He further attributed new rate to the upsurge in prices of goods and services as well as petroleum products.
“Headline inflation has risen sharply to 15.7 percent in February 2022, and both headline and core inflation are significantly above the upper limit of the medium-term target band.”
He said the uncertainty surrounding price developments and its impact on economic activity is weighing down business and consumer confidence.
“The risks in the outlook for inflation are on the upside and include petroleum price adjustments and transportation costs, and exchange rate depreciation,” he added. “The Bank’s latest forecast still depicts an elevated inflation profile in the near term, with inflation falling within the medium-term target band within a year”, he revealed.
Mr. Addison said the combination of tighter global financing conditions, sharp pressures on the exchange rate, and elevated inflation pose some policy challenges.
Inferring from the above, he said the Bank of Ghana will, effective, 1st April 2022, increase the cash reserve ratio to 12%, in relation to universal banks.
Also, “the capital conversation buffer has been reset to the pre-pandemic level of 3% making the capital adequacy ratio a total of 13% and the provisional rate for loans in the other loans exceptionally mentioned category, has been reset to the pre-pandemic level of 3%,” Dr. Addison added.
The monetary policy rate, which is of keen interest to businesses, signals the rate at which the Central Bank will lend to commercial banks.
By Jamila Akweley Okertchiri