The Bank of Ghana (BoG) has announced the decision to maintain the monetary policy rate at 30%, marking the second consecutive instance of such a move by the Monetary Policy Committee (MPC). The decision comes against the backdrop of easing headline inflation, which reached 35.2% in October 2023. Governor Dr. Ernest Addison attributes the Bank’s stance to the imperative of reinforcing the disinflation process and other contributing factors.
Key Points:
Consistent Monetary Policy: The MPC has opted to keep the monetary policy rate unchanged at 30%, continuing the approach adopted in September 2023. This decision is aligned with the BoG’s commitment to fostering disinflation and economic growth.
Easing Headline Inflation: Despite maintaining the policy rate, headline inflation has experienced a deceleration, reaching 35.2% in October 2023. The BoG acknowledges the positive impact of its monetary policy stance, a stable exchange rate, and base drift effects on the disinflation process.
Fiscal Consolidation: The Governor emphasizes the importance of sustained fiscal consolidation to reinforce economic stability and the disinflation process. The implementation of the budget has shown strength, meeting fiscal targets for the first review.
2024 Budget Statement: The BoG’s decision is influenced by the ongoing fiscal consolidation, with the 2024 budget statement designed to support economic stability and reinforce the disinflation trajectory.
Tight Monetary Policy Stance: The BoG remains vigilant on risks to the disinflation process and asserts the need to keep the policy rate tighter for an extended period until inflation is firmly anchored on a downward trajectory towards the medium-term target.
Inflation Expectations: Core measures of inflation and inflation expectations are showing a downward trend, supporting the BoG’s confidence in the continuation of the disinflation process.
Summary: The Bank of Ghana’s decision to maintain the monetary policy rate at 30% underscores its commitment to steering the economy towards disinflation and sustained economic growth. With easing headline inflation and a focus on fiscal consolidation, the BoG aims to keep the policy rate tighter for a prolonged period until inflation is firmly on a downward trajectory. The decision reflects a proactive approach to economic stability amidst ongoing fiscal efforts and positive indicators in the inflation landscape.