The Bank of Ghana has increased its policy rate by 100 basis points to 28% in a bid to tame inflation.

Speaking at his first Monetary Policy Committee (MPC) press conference, the Bank of Ghana Governor, Dr. Johnson Asiama, attributed this action to current economic uncertainties influenced by external developments and concerns of inflation going up.

"As inflation becomes firmly anchored, the Committee will reassess the scope for a gradual easing in the policy stance", the Governor pointed out.

While headline inflation has declined marginally, Dr. Asiama said it remains a concern.

According to him, both food and non-food inflation are significantly above expectation, and core inflation
remains elevated.

"While food inflation was driven largely by supply-side factors, preventing second-round effects from such increases will be essential. The persistent inflation dynamics over the past year, partly driven by both fiscal and monetary policy missteps, will require a policy reset to re-anchor the disinflation process. To
restore price stability going forward will require a tight monetary policy stance, strong liquidity management, and commitment to the 2025 budget which seeks to reset the fiscal consolidation process", he added.

The MPC also noted that the global environment has become more challenging, reflecting trade and economic policy uncertainty.

It said the series of tariffs announced by the U.S. administration is evolving and may have negative
effects on the global economy. These developments have already triggered downgrades in GDP growth forecasts in the two largest economies—the U.S. and China—and, in turn, global growth.

Additional Operational Measures

Meanwhile, in addition to the adjustment in the policy rate, the Central Bank is implementing complementary measures to strengthen liquidity management and enhance monetary policy transmission.

In this regard, the Bank said it will introduce a 273-day instrument to augment the existing sterilization toolkit, intensify the monitoring of banks’ Net Open Positions (NOPs) to ensure compliance and review the current structure of the Cash Reserve Ratio (CRR) to assess its broader impact on liquidity conditions and financial intermediation in the economy.