POLICY RATE KEPT UNCHANGED AT 19%
According to Governor Ernest Addison, the Monetary Policy Committee of Ghana’s Central Bank has kept its main interest rate unchanged at 19%. He told a news conference in Accra on Monday, 25th of July 2022.
He added that the bank has stood at a pause in order to observe the impact of the inflationary pressures of recent rate hikes as well as other policies. Also, he noted that the bank had also observed the persistent inflationary rate which has extended its borders on all consumables.
He said, “The Bank of Ghana has responded decisively with its policy tools over the last few months increasing the policy Rate by a cumulative 550 basis points since November 2021 and tightened liquidity conditions. The Committee also noted the deceleration in the rate of increase in inflation in the last reading.” He thus pointed out that this inflation perception has further increased and influenced agitations for Cost of Living Allowance in most workplaces.
Moreso, the Governor said, “ The bank was of the view that it will appropriate to pause and observe the impact of the recent monetary policy measures already taken.” He further stated that they envisage that a fund-supported program is a sure way to help Ghana anchor stability and prevent any wage-price spiral.
This will be done by implementing reforms to store credit worthiness. Eventually, and in the long run, access to the International Capital market will be regained. This funding, he said, was solely from domestic sources. This is because the planned borrowing from other international sources proved futile.
THE INTEREST RATE
In reaction to interest rates, it is indicated that it has generally trended upwards together with the Bank and policy stance. The interbank weighted Average Rate increased from 12.68% In December 2021 to 19.92% in June 2022. This is consistent with the direction of the policy Rate. Also, the 91-days and 182 days Treasury bill rate has also increased from 12.49% and 13.19% to 24.15% and 25.55% respectively.
FURTHER THOUGHT
Moreover, one Fellow at the Institute for Fiscal Studies in Accra, Leslie Dwight Mensah, stated that pausing rate hikes is very much relevant for now. This is because of the fact that the inflationary pace is easing out. He said, “Moreover, hiking the rate has other costs, including on economic growth and the government’s borrowing costs, that the Central Bank needs to be mindful of.”
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