The Monetary Policy Committee (MPC) of the Bank of Ghana has left the Policy Rate unchanged at 19%.

This means cost of borrowing will remain relatively same at least for the next two and half months.

Speaking at a News Conference today, July 25^th, 2022, the Governor of the Central Bank, Dr. Ernest Addison, said this is because the rising inflation rate has started responding to the last policy rate increase, hence the need to monitor the situation further, before any policy action.

The two inflation readings since the May MPC meeting, the Governor, said pointed to continued broad-based upward pressure on prices, reflecting the pass-through effects of increases in ex-pump petroleum prices, transport costs, currency depreciation, and food prices.

Headline inflation increased markedly from 23.6% in April 2022 to 27.6% in May 2022, and then further up to 29.8% in June.

Dr. Addison said the committee identified that inflation has persisted on an elevated path, adding, a detailed review of the consumer basket shows that although initially driven by supply-side shocks, the initial relative price changes have broadened to almost all the items in the consumer basket.”

Over 80% of the items in the basket recorded inflation above 20%.

Therefore, Dr. Addison pointed out that inflation perceptions and expectations, as revealed in the Bank of Ghana’s surveys of consumers and businesses, have increased, and influenced agitations for Cost-of-Living Allowances in workplaces.

“The Bank of Ghana has responded decisively with its policy tools over the last few months increasing the policy rate by a cumulative 550 basis points since November 2021 and tightened liquidity conditions. The Committee also noted the deceleration in the rate of increase in inflation in the last reading”, he mentioned.

Furthermore, Dr. Addison stressed that the committee expects that the macroeconomic framework that will underpin an agreed IMF-supported programme will present a stronger coordinated monetary and fiscal policy framework that will anchor stability and prevent a wage-price spiral, which will lead to inflation becoming more entrenched.

“Based on the above assessments, the Committee was of the view that it will be appropriate to pause and observe the impact of the recent monetary policy measures already taken. The Committee therefore decided to maintain the monetary policy rate at 19.0%".

Interest rates trended upwards

Interest rates generally trended upwards in tandem with the Bank’s policy stance.

In the money market, the Interbank Weighted Average Rate (IWAR) increased to 19.92% in June 2022 from 12.68% in December 2021, consistent with the direction of the policy rate.

Similarly, rates on the shorter dated government securities increased significantly between December 2021 and June 2022.

The 91-day and 182-day Treasury bill rates increased to 24.15% and 25.55%, from 12.49% and 13.19%, respectively.

The rate on the 364-day instrument increased to 27.14%, from 16.46%.