The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) will commence its 107th Regular Meetings from today, Wednesday, July 20, 2022 to Friday, July 22, 2022 to review developments in the economy.

This will be the fourth time the MPC is meeting this year which is expected to be concluded with a press conference on Monday, July 25, 2022 to announce the decision of the Committee.

The Central Bank of Ghana’s MPC meets every two months to review developments in the global and domestic economies and the committee’s decision after every meeting is based on the current economic conditions in the country and around the globe.

In its last meetings held in May this year, the Committee decided to raise the policy rate by 200 basis points to 19.0 percent after an assessment of developments within the global and domestic economies.

Ahead of the Meetings, the Institute of Economic Affairs (IEA) has projected another hike in the policy rate by about 100-150 basis points.

According to the IEA, this adjustment will narrow the Inflation-Policy Rate gap, although the real Policy Rate will still remain negative. Also, the Policy Think Tank stated that the adjustment will signal the MPC’s unwavering commitment to fighting the inflation and bring it under control as well as send the right signal to, and help calm, the markets.

Inflation is of a major concern and poses a greater risk, especially as the outlook of Covid-19 and the Russia-Ukraine war, key drivers of current global inflation, remain uncertain, while economic hardship has also heightened.

Based on that, the IEA indicated that the Committee faces a challenging decision as inflation shot up further to 29.6% in June, the highest in eighteen years. In the past year, the MPC has acted aggressively to stem the soaring inflation by raising the PR cumulatively by as much as 550 basis point to 19.0%, the last increase being 200 basis points in May.

Growth remains positive but weak

According to BoG, growth prospects in the domestic economy remain positive and the Bank’s high frequency indicators point to continued and increased momentum in economic activities with private sector credit showing some improvement in real terms, despite the increased price pressures.

After the Central Bank’s assessments, provisional GDP figures released by the Ghana Statistical Service (GSS) show that in the first quarter of 2022, growth was 3.3%, lower than 3.6% recorded in the corresponding quarter of 2021 as well as the 7.0% recorded in the last quarter of 2021.

This means growth momentum in the domestic economy slowed down considerably in the first three months of the year.

Amid the crisis, the government is formally engaging the International Monetary Fund (IMF) for support regarding its balance of payment challenges. The engagement between the government and the Fund, according to Finance Minister, Ken Ofori-Atta, will help boost investor confidence in the economy.

In its previous meetings, the Committee observed that execution of the budget for the first quarter was broadly in line with targets although there was a minor deviation in the deficit target, stemming largely from low revenue receipts.

“It is the expectation of the Committee that fiscal consolidation will take hold gradually and the mid-year budget review will provide further fiscal fine-tuning to ensure that the fiscal consolidation efforts stay on track”.
Bank of Ghana

Fiscal consolidation and stringent fiscal policies are expected to complement the Bank of Ghana’s efforts to help address the rising inflation in the country.