In line with its objective to reduce Ghana’s current high inflation rate, the Monetary Policy Committee of the Bank of Ghana has increased the Monetary Policy Rate by 150 basis points.
The increase of 150 basis points translates to a 1.5% increase in the Monetary Policy Rate raising the figure from the previous rate of 28% to 29.5%.
This increase was announced by the MPC through a press conference after its 111th Monetary Policy Committee Meeting on Monday, March 27, 2023.
This means that Ghanaians, especially private sector businesses that heavily rely on loans, should brace themselves for an increase in interest rate as the rise in the Monetary Policy component in the Ghana Reference Rate (GRR), a determinant of interest rate in Ghana, is expected to rise.
Average lending rates shot up marginally to 36.64% in February 2023, from 35.58% recorded in December 2022. This is equivalent to 3.02% interest rate on loans per month.
Justifying the need for the increase in the rate on Monday, the Governor of the Bank of Ghana, Dr. Ernest Yedu Addison explained that although the inflation rate in the past few months has marginally reduced, it is still relatively higher compared to the government’s medium-term target of 8+/-2%.
He however added that he is optimistic about the rate going forward as the ease in price pressures abroad will likely impact positively on Ghana’s domestic inflation.
“Headline inflation has declined marginally for two consecutive months, but continues to remain relatively high compared to the medium-term target of 8±2%. To place the economy firmly on the path of stability and reinforce the pace of disinflation, it is important that the monetary policy stance be tuned further to reanchor inflation expectations towards the medium-term target. Given these considerations, the MPC decided to increase the Monetary Policy Rate by 150 basis points to 29.5%”, he said.