Policy Rate Still 30%

Dr. Ernest Addison


THE MONETARY Policy Committee (MPC) of the Bank of Ghana has maintained the monetary policy rate at 30.0 percent.

Explaining its decision, the committee noted that although inflation was decelerating, it remained high relative to target. “Therefore, there is a need to keep the policy rate tighter-for-longer until inflation is firmly anchored on a downward trajectory towards the medium-term target,” Dr. Ernest Addison, chairman of the MPC, noted at a press conference yesterday.

He said the latest bank forecast indicated that the disinflation process was expected to continue, supported by the current tight monetary policy stance, relatively stable exchange rate, and base drift effects, adding all the core measures of inflation and inflation expectations were pointing downwards, and the bank would remain vigilant on risks to the disinflation process.


Additional Monetary Policy Measure

The committee chairman also announced some changes to unify the currency holding for the Cash Reserve Ratio requirement on foreign currency denominated deposits and domestic currency deposits for banks.

“The new unified Cash Reserve Ratio for total deposits (cedi and foreign currency) – are to be held in cedis – and this is therefore being reset to 15 percent effective 30th

November, 2023. This measure is to reinforce the bank’s liquidity management operations to address excess structural liquidity conditions in the market and provide additional impetus to the disinflation process. The committee will continue to monitor developments in the banking sector and deploy other policy tools, as and when required, to support stability,” he noted.

Also, he said “The committee observed the broad improvements in the economy, reflecting stable exchange rates, the sustained disinflation process, and increased accumulation of foreign exchange reserves. These developments reflect improvements in underlying policies, including fiscal consolidation, zero financing of the budget by the central bank, and relatively favourable external conditions. In the outlook, the improvements will be sustained by the continued maintenance of tight monetary conditions, sustained fiscal consolidation, and continued reserve accumulation supported through the Gold for Reserves programme.”



Touching on growth, he said domestic economic activity continued to recover evidenced by the steady improvement in the bank’s high frequency economic indicators.

“The CIEA is recovering from negative territory and is likely to turn positive by year end, showing a more solid rebound in economic activities. Both business and consumer sentiments remain largely stable. Private sector credit growth, however, remains dampened due to risk aversion by banks amid tightened policy conditions and rising credit risk. With continued improvement in the macroeconomic conditions supported by declining inflation, credit conditions are expected to improve with a turnaround in credit extension to support growth.

“The external payment position is expected to improve, underpinned by continuous implementation of the IMF-supported programme, and the Gold for Reserves programme, among others. The early completion and settlement of favourable agreement terms with bilateral creditors and commercial bondholders will help boost confidence and trigger resource flows to the economy. The strong build up in reserves have provided cushion against external vulnerabilities, including the delay in the cocoa syndicated loan. Reserve build-up will even be stronger by the end of the year on receipt of the cocoa loan and disbursement of the IMF second tranche,” he added.


BY Samuel Boadi