The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) will hold its 109th Regular Meetings from Tuesday, November 22, 2022 to Friday, November 25, 2022 to review developments in the economy.

The meetings will conclude with a press conference on Monday, November 28, 2022 to announce the decision of the Committee.

Ghana’s economy remains entangled with several challenges since the beginning of the year which the government has, on several instances, blamed on the aftermath of the COVID-19 pandemic and the Russia-Ukraine war.

One of the major challenges facing the country is the instability of the local currency, the Cedi. As an import-dependent economy, this has been transmitted into rising prices of imported goods and services which continue to rise.

Local production has also been stifled as most of these inputs and intermediate goods are imported to aid local production. A rise in prices of fertilizer during the beginning of the major planting season affected farmers, some of who had to reduce the planned acreage of their farms.

In addition, the high prices of petroleum products continue to weigh on citizens with transport operators having no choice than to continue to increase fares. Unsurprisingly, transportation consistently recorded one of the highest inflation rates throughout this year.

In its last meetings, the Monetary Policy Committee (MPC) of the Bank of Ghana deemed it appropriate to increase the Monetary Policy Rate by 250 basis points to 24.5 percent.

Commitment to re-anchoring inflation expectations

According to the Committee, it remains committed to re-anchoring inflation expectations and returning to a disinflation path, the main rationale for hiking the rate.

The Bank of Ghana highlighted that recent global developments reflect among others, heightened economic and policy uncertainties, fostered by the strong commitment on the part of advanced economies to decisively tackle inflation.

The Central Bank warned that inflation remains elevated and the balance of risks is on the upside. Although the forecasts are for monthly inflation to continue to slow down, it pointed out that the risks are on the upside, emanating largely from pass-through effects of the currency depreciation, the recent upward adjustment in utility tariffs, and rising inflation expectations.

Price pressures remained elevated. The latest reading indicated that headline inflation accelerated by 3.2 percentage points from 37.2% in September to 40.4% in October 2022, driven mainly by increases in food prices, household maintenance expenses as well as housing, electricity and fuel.

On the fiscal situation, BoG noted that while expenditures have been broadly on target, revenue performance has been below expectations, complicating fiscal policy implementation.

Financing of the budget so far has predominantly been from the banking sector with the central bank absorbing a larger share. The Bank of Ghana explained that persistent uncovered auctions and portfolio reversals by non-resident investors continue to pose risks to financing of the budget, resulting in monetization of the budget deficit by the central bank.

The Monetary Policy Committee recognized the fact that the current condition is sub-optimal and will be interim until agreements are reached on an IMF-supported programme.

With the IMF agreement still yet to be finalized and inflation continues to rise unabated, fears that monetary tightening could shrink growth momentum and plunge the economy into a recession next year is mounting. The MPC may, despite turning hawkish of late, remain put as it expects its previous policy actions to make the needed impacts on the economy before making any further moves.