The Monetary Policy Committee (MPC) of the Bank of Ghana will hold its 108th Regular Meetings from Tuesday, September 20, 2022 to Friday, September 23, 2022 to review developments in the economy.
The meetings will conclude with a press conference on Monday, September 26, 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.
After maintaining the policy rate at 19% in its meetings in July, the Committee was forced to hold an extraordinary meeting on Wednesday, August 17, 2022 to review recent developments in the economy and to assess risks to the outlook.
The review resulted in the MPC hiking the policy rate by 300 basis points to 22% and rolled out additional measures to tame inflation as well as to strengthen the local currency. The Committee’s decision was based on the increase in inflation in the month of July and heightened pressures in the foreign exchange market.
Risks of inflation
The latest consumer price index release showed that the headline inflation accelerated further for the eleventh consecutive month to 31.7 percent in July 2022, from 29.8 percent in June 2022. This was driven by both food and non- food price pressures.
Food inflation rose to 32.3 percent in July 2022 from 30.7 percent in June 2022. Similarly, non-food inflation increased to 31.3 percent from 29.1 percent in June 2022, contributing 55 percent to the rise in headline inflation in July 2022.
The above developments have translated into relatively strong underlying inflationary pressures. The Bank’s core measure of inflation, defined to exclude energy and utility indices, increased to 30.2 percent in July 2022 from 28.4 percent in June.
On month-on-month basis, headline inflation rose by 3.1 percent in July 2022 compared with 3.0 percent in June 2022. The increase in monthly inflation was underpinned by increases of 3.3 percent and 3.0 percent in food and non-food inflation respectively.
Developments in foreign exchange market
Recent developments in the foreign exchange market showed elevated demand pressures, reflecting among others, continued heightening of uncertainties in the global economy, rising inflation in many advanced economies and the resultant coordinated tightening of monetary policy stance by major central banks.
The US Dollar continues to strengthen against all major currencies. Official data from the Bank of Ghana show that from the beginning of the year to date, the Ghana Cedi has depreciated by 25.5 percent year-to-date, reflecting “the Ghana- specific situation”.
The Bank of Ghana attributed this to the challenging financing of the budget from both domestic and external sources, downgrading of sovereign credit rating, non- residents’ disinvestment in local currency bonds, and loss of reserve buffers.
Meanwhile, the Managing Director of the International Monetary Fund, Kristalina Georgiva, has reiterated her outfit’s commitment to finalizing the deal between Ghana and the IMF before the end of the year.
She assured President Nana Addo Dankwa Akufo-Addo, on Monday, 5th September 2022 in a closed door meeting on the sidelines of the Africa Adaptation Summit in Rotterdam that “we understand the urgency, and we will move as quickly as possible”.
Kristalina Georgieva emphasized that Ghana’s current economic challenges are not locally generated but from external shocks. Ghana is seeking to reach an agreement with the Fund for an economic program which is expected to bring a total of $3 billion dollars to support the country’s balance of payment challenges.