The Central Bank of Ghana Monetary Policy Committee (MPC) has announced its decision to keep policy rate unchanged at 29.5%.
The Governor of BoG, Dr. Ernest Addison cited a slowdown in inflation as the main reason to the unchanged rate, which is the rate at which it lends to commercial banks.
The decision by the MPC is however in contrast to the monetary policy tightening stance expected to be taken by the BoG, as a condition to the implementation of the $3bn IMF programme.
Announcing the new policy rate, the Governor of the Central Bank of Ghana, Dr. Ernest Addison, communicated that the Bank’s decision to maintain the policy rate is due to an indication of a strong return to disinflation path coupled with the signing of the Memorandum of Understanding on zero financing to the budget to eliminate fiscal dominance and allow for a faster ease in inflation towards the target band.
“These policies provided the much-needed anchor to reinforce the disinflation process and reset the economy on the path of recovery.”
Dr. Ernest Addison
Dr. Addison further disclosed that tightening monetary policy through increased liquidity management operations to handle excess liquidity in the market, relative stability in the local currency, and softening of ex-pump petroleum prices have all aided the disinflationary process.
Banking Sector Performance, Upward Trend Of Interest Rates
The Governor in his brief statement revealed that the banking sector’s performance in 2022 audited financial statements essentially represented the general macroeconomic operating environment, as well as the impact of the Domestic Debt Exchange Programme.
He, however, stated that the prudential returns for the first four months of 2023 have shown signs of recovery in the profitability of banks and a gradual improvement in the solvency positions.
This, he said, is supported by the regulatory reliefs issued to safeguard stability of the financial sector.
In the money market, interest rates at the short end of the yield curve were largely trending upward in April 2023, consistent with the tightening policy stance.
In April 2023, the 91-day and 182-day Treasury bill rates climbed to 19.67% and 22.29%, respectively, from 16.22% and 16.72% in April 2022.
Similarly, the 364-day instrument’s rate grew to 27.04% in April 2023, up from 18.93% in April 2022.
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