Inflation figures peak globally due to COVID-19
14.5% policy rate to be maintained - IEA predicts
The Bank of Ghana’s Monetary Policy Committee will today January 31 announce its first policy rate decision of 2022.
This comes after the central bank's MPC held its first scheduled meetings for the year from January 25 to January 28 to review economic developments of the country.
Following its 104th meeting, Governor of the Bank of Ghana, Dr. Ernest Addison, who is also Chairperson of the Monetary Policy Committee, is expected to make decisions that will influence the cost of credit in the country for the first three months of the year.
Among such decisions will be a review or maintenance of the monetary policy rate which was at the central bank’s 103rd meeting reviewed from 13.5 percent to 14.5 percent, indicating its a measure to help contain significant risks to inflation and dampen emerging pressure on the cedi.
But ahead of the BoG’s decision, Director of Research at the IEA, Dr. John Kwakye believes that despite a surge in inflation, increase in foods prices and fuel price hikes, the MPC is not likely to review the policy rate upwards.
“Looking at the balance of risk between inflation and growth, my judgement is that the inflation risk outweighs the growth risk at this time, and on that score, you would say that the policy rate should be adjusted upwards," Dr. Kwakye earlier told the B&FT Newspaper.
He continued, "...However, recalling that the rate was increased by 100 basis points just two months ago, at the last meeting, the likelihood of another increase is low.”
“My expectation is that the Committee will play it safe by holding the rate as it is,” Dr Kwakye is quoted to have said this speaking during a round-table discussion on the theme: “Making Monetary Policy in Ghana More Fit-for-Purpose.”
The IEA Director of Research however said a move to maintain the policy rate, is expected to allow the MPC to have a clear view of the inflationary trend and decide the way foward at its next meeting for the year.
The monetary policy rate is of keen interest to businesses and the private sector as it influences the interest rate on loans and determines the rate at which the central bank lends to commercial banks.
The Bank of Ghana Headquaters