Cost of borrowing is expected to go up further, as the Institute of Economic Affairs (IEA) is urging the Bank of Ghana to increase the Policy Rate (PR) by 1.0% or 1.50% to 20% or 20.5%.

Its argument is that the upward adjustment will narrow the inflation-Policy Rate gap, although the real Policy Rate will still remain negative.

In a statement signed by its Director of Research, Dr. John Kwakye, it said furthermore, the adjustment will signal the MPC’s unwavering commitment to fighting the inflation and bring it under control.

“The adjustment will also send the right signal to, and help calm, the markets”, it added.

Furthermore, the policy think tank explained that the next meeting of the MPC in September 2022, when the Committee would have had the benefit of two more inflation readings in July and August, would give it a clearer sense of the trend for it to reposition the PR accordingly.

The Monetary Policy Committee (MPC) of Bank of Ghana will hold its 107th meeting to decide on the Policy Rate (PR) on July 20-22, 2022. Once again, the Committee faces a challenging decision as inflation shot up further to 29.8% in June, the highest in 19 years.

In May 2022, the MPC adjusted its policy rate for the second consecutive time to 19%

“To deal effectively with the current inflation—and to limit the harm that exclusive use of the PR could cause—we have called for the Bank of Ghana and Government to work together to target directly the key inflation drivers, viz. food, fuel, transport and the exchange rate. We have provided detailed suggestions to address these factors in a July 12 Roundtable paper titled: Rethinking Inflation Management in the Wake of Covi-19 and Russia-Ukraine War”, it proposed.

“In major countries such as the US and UK, the governments have made inflation control a top policy priority and are taking measures to complement their central banks’ actions. The same approach is needed in Ghana. Even the IMF that is known not to be a fan of subsidies, has called on member governments to provide food subsidies to their citizens to cushion the cost of living crisis. This call should tell us that new interventions are required in dealing with what is clearly an unconventional-type of inflation that is currently sweeping the globe”, it added.

The Monetary Policy Committee of the Bank of Ghana will begin its quarterly meeting tomorrow, with the primary focus of the committee is to craft a policy to help stem the continuous rise in inflation.

Already, interest rates have remained relatively stable on the money market for the third week running.