The Policy Rate of the Bank of Ghana is projected to remain at 14.50% in 2022, Fitch Solutions, research arm of ratings agency, Fitch’s 4th Quarter Country Report has stated

In its Country Report for the 4th Quarter of this year, Fitch Solutions said it expects the Bank of Ghana to keep its key lending rate – the rate at which commercial banks borrow – at 14.5% throughout next year, as risks to the growth outlook fades.

However, the forecast for the policy rate will remain well below the 2010 to 2019 average of 18.15%.

“Our forecast for the Central Bank rate remains well below the MPR’s 2010-19 average (18.15%), reflecting our view that the US Fed will delay monetary policy tightening until 2023, which will limit pressure on the BoG to implement a larger hike”.

The report stated that the regulator of the banking industry is mindful of the borrowing costs for business and consumers, and the potential costs to economic recovery.

 It further pointed out that the Central Bank will shift its focus to inflation targeting and support the cedi as risks to growth reduces.

“We believe that with risks to growth reducing, the BoG will shift to focus on targeting inflation and supporting the cedi.

BoG increases Policy Rate to 14.5%

The Monetary Policy Committee (MPC) of the Bank of Ghana has increased its Policy Rate – the rate at which it lends to commercial banks by 100 basis points (1%) to 14.5%, citing risks to inflation, exchange rate as well as fiscal and debt sustainability challenges.

It’s the first time since 2015 that the MPC has increased its key lending rate.

This is expected to trigger an increase in the cost of borrowing, but may help stem the recent pressures on the cedi and the price of goods and services.

“Headline inflation has risen consistently from the low of 7.5% in May 2021 to 11.0% in October driven by both food and non-food price increases. In addition, all the Bank’s core measures of inflation have increased, indicating broad-based underlying inflation pressures, with the potential of de-anchoring inflation expectations. Currently, headline inflation is above the upper limit of the medium-term target band and the Committee noted significant risks to the inflation outlook”.

“These risks include rising global inflation, high energy prices, uncertainties surrounding food prices and investor behaviour. The Committee further noted that these elevated inflationary risks, require prompt policy action to re-anchor inflation expectations to safeguard the central bank’s price stability objective. Given these considerations, the Committee therefore decided to raise the policy rate by 100 basis points to 14.5 percent”, the MPC detailed report stated.



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