As the Monetary Policy Committee of the Bank of Ghana prepares to begin its quarterly meeting to review developments in the Ghanaian economy, Economist Dr. Patrick Asuming has predicted that the committee is likely to hike the policy rate.

Currently, the policy rate is at 27%, while November 2022 inflation stood at 50.3%.

The MPC is expected to have its first meeting for 2023, from Tuesday, January 24, to Friday, January 27 to review developments in the economy.

Already, Fitch Solutions is projecting a 200 basis points increase in the policy rate in 2023 to 29%.

Speaking to Joy Business, Dr. Asuming, maintained that it is likely the committee will hike the policy rate to check the high inflation rate recorded in the country.

“A rate increase is likely to occur. It will somehow depend on the inflation for December [2022] which may be released next week”, he said.

According to him, the committee since mid-year 2022 has been responding to the increase in inflation to help maintain price stability but to no avail.

He explained that a similar development occurred leading to inflation recording 50.3% in November 2022.

Reacting to recent gains made by the cedi against the dollar, Dr. Asuming argued that the focus of the committee has been largely aimed at price stabilisation through inflation targeting.

“If you look at the way the committee and its work, it places more premium on inflation than growth”, he observed.

November 2022 inflation rate

Inflation went up by 9.9% to 50.3% in the month of November 2022.

The increment was expected because of fuel price increases and the cedis’ depreciation during the month under review.

However, the trend may halt or reverse in December 2022 due to the recent improvement in the value of the cedi to the dollar and fall in fuel prices.

Policy rate hike

The MPC in October 2022 increased the policy pate by 250 basis point to 24.5%.

By December 2022, the rate had gone up 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.