The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased the policy rate by 100 basis points to 14.5% percent.

This is the first time the Central Bank has increased the key rate since May this year, after being maintained at 13.5% for two consecutive times.

The rate, which is of keen interest to businesses, signals the rate at which the Central Bank will lend to commercial banks. It also subsequently influences average lending rates on loans to individuals and businesses.


In a statement issued by the Central Bank, Governor, Dr. Ernest Addison, attributed the decision to the consistent rise in the headline inflation from the low of 7.5 percent in May 2021 to 11.0 percent in October, rising global inflation, high-energy prices, uncertainties surrounding food prices and investor behaviour.

It further noted that, all the Bank’s core measures of inflation have increased, indicating broad-based underlying inflation pressures, with the potential for de-anchoring inflation expectations.

“Currently, headline inflation is above the upper limit of the medium-term target band and the Committee noted significant risks to the inflation outlook. These risks include rising global inflation, high-energy prices, uncertainties surrounding food prices and investor behaviour,” it noted.

The Committee further noted that these elevated inflationary risks, require prompt policy action to re-anchor inflation expectations to safeguard the central bank’s price stability objective.

The Central Bank further noted that the country’s sovereign bond spreads widened markedly over the period as investor sentiments shifted based on fiscal and debt sustainability concerns, prompting some sell-off by investors with spillovers on the domestic foreign exchange market.

This triggered some currency pressures in the past two months as demand for the U.S. dollar increased.

“However, the adequate reserve levels provided some buffers and supported a much slower depreciation pace compared with pre-pandemic levels. In the outlook, the Committee is of the view that the strong reserve buffer level should provide some assurance to the market and help abate investor concerns, as the country’s external payment position remains strong”, it pointed out.

On growth, the Bank of Ghana said the Committee assessed that the recovery in the real sector was progressing at a steady pace, with high-frequency economic indicators reflecting increased momentum in the pace of economic activity, close to pre-pandemic levels.

Again, consumer and business sentiments have turned around, driven by perceived improvements in economic prospects, although consumers expressed concerns about current household finances.

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