The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased policy rate by 100 basis points from the initial 27 per cent to 28 per cent.
In the interim, this forms part of the central bank’s measures to moderate liquidity in the system in order to underpin macroeconomic adjustments taking place.
This, the bank believes will further drive inflation on a downward path.
Other parameters like inflation – measured by the Consumer Price Index (CPI), lending rate, exchange rate, amongst others are expected to be affected with the new policy rate introduced.
Just as have been seen happening over the years in Ghana, inflation, as well as lending rate is expected to soar while cooling down the exchange rate.
The outlook of inflation over the years has been abysmal, with individuals, businesses, corporates and households, suffering the consequences thereof.
The year-on-year inflation – including both food and non-food prices in December, 2022, stood at 54.1%, hitting the highest recorded in the history of Ghana.
This inflation record relative to the 12.6% recorded for the same reference period in the previous year, rose by approximately 41.5%, showing a significant change in the inflation.
This peak in inflation is attributed to the depreciation of the Ghanaian cedi against the dollar, towards the end of the year, 2022.

“Food and non-food inflation went up significantly. Food inflation surged to 59.7 percent in December from 55.3 percent in November 2022, while non-food inflation rose to 49.9 percent from 46.5 percent over the same comparative period.”
MPC Press Release
The continuous surge in inflation rate in the long term expectedly affects consumer prices of goods and services, hence, consumption.
A clear and close example is what has been witnessed in the Ghanaian market over the past few months with elevated values in the quoted prices of goods sold.
A later appreciation of the cedi did not even seem to help bring down the high prices at which goods were sold.
Small businesses especially those into retail businesses are also likely to be the most affected when inflation goes high.
Not only is inflation going to be affected, the average lending rate to individuals, businesses and corporates is also to witness a sharp rise as a result of the new policy rate.
The average lending rate over the years, though steadily increasing, witnessed a sharp rise to 35.58% in December, 2022 relative to 20.04% within same period in 2021, showing a significant growth by 15.54%.
The reference rate also sharply rose from 13.89% in December 2021 to 32.83% in same period last year, 2022.
According to the press release, private sector credit growth picked up despite the high lending rate, owing largely to portfolio rebalancing by banks and revaluation effects on foreign currency denominated credit.
“In nominal terms, private sector credit increased by 31.8 percent in December 2022, compared with 11.2 percent in December 2021. In real terms, however, private sector credit contracted sharply by 14.5 percent, compared with 1.3 percent contraction over the review period, reflecting sustained price pressures.”
MPC Press Release

The banking sector’s developments mirrored the current economic situation, with rising credit costs from inflation and balance sheet improvement from revaluation. This led to a slowdown in the sector’s performance in December 2022 compared to the previous year.
Economic headwinds are likely to persist till mid-2023
According to the MPC’s Press Release, due to the uncertain nature of the global economic outlook owing to elevated and broad-based inflation, tightening, worsening financial conditions, and lingering spillover effects of geopolitical tension, these headwinds are likely to persist till mid-2023.
This is expected to further drive down confidence and weaken real household disposable income in advanced and emerging market economies though a firm growth momentum has been projected for developing and emerging economies.
All these and more held the discussions for the Monetary Policy Committee meeting that began on Tuesday, January 24, 2023 and was scheduled to end Friday, January 27, 2023. Issues discussed were however concluded on today, Monday, January 30, 2023.
The MPC has scheduled its next meeting for March 22, 2023 to March 24, 2024 which is to be concluded on Monday, March 27, 2023.