The Bank of Ghana has announced that it will hold its first Monetary Policy Committee (MPC) meeting for 2023 from Tuesday, January 24, to Friday, January 27 to review developments in the economy.

The meeting, which will be the 110^th is expected to heavily discuss Ghana’s high inflation rate which stands at 50.3 percent, the highest in 27 years. Also, the committee will use the meeting to decide whether to hike the policy rate, maintain it, or reduce it.

“The meetings will conclude with a press conference on Monday, January 30, 2023 to announce the decision of the Committee”, a short statement from the BoG said.

Last policy rate hike

The MPC in December 2022 increased the Policy Rate to 27%.  

The rate hike indicated that it will become more expensive to borrow from banks, a situation that also contributed in pushing cost of living and doing business in the country further up.

Addressing the media at the time, the Governor of BoG, Dr Ernest Addison, explained that the committee reached the decision in order to check the rising rate of inflation as the country negotiates with the International Monetary Fund (IMF) for an economic programme.

“Inflation remains elevated and the balance of risks is on the upside. Although the forecasts are for monthly inflation to continue to slow down, the risks are on the upside, emanating largely from pass-through effects of the currency depreciation, the recent upward adjustment in utility tariffs, and rising inflation expectations”, he said.

“The Committee remains committed to re-anchoring inflation expectations and returning to a disinflation path,” Dr. Addison added.

Interest rates surge

The Bank of Ghana also said short-term interest rates on the money market have reflected recent developments, while medium-term to long-term rates have remained relatively behind the yield curve.

For example, while the discount rate on the 91-day instrument has increased to 29.7% in September 2022 from 12.5% in September 2021, the coupon rates on the 7-year, 10-year, 15-year, and 20-year have remained unchanged at 18.1%, 19.8%, 20.0% and 20.2% respectively.

The interbank market weighted average rate has increased to 22.05% in September 2022 from 12.61% in September 2021, consistent with the rise in the policy rate.

Average lending rates of banks have also adjusted upwards to 29.81 per cent in September 2022 from 20.20 per cent recorded in the corresponding period of 2021.

Policy rate gone up by 9.5% since March 2022

Since the Bank of Ghana first increased the policy rate in March 2022, the interest policy rate has gone up by 9.5%.

The Central Bank increased the policy rate by 2.5% on March 25, 2022, to 17%, and subsequently increased it on May 23, 2022, to 19%.

It again adjusted it upwards by 300 basis points to 22% in August 2022.