BoG Hikes Policy Rate to 28% Amid Inflation Woes – Key Takeaways from 123rd MPC Press Conference

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has announced an increase in the Policy Rate from 27% to 28%, citing a more challenging global environment.

During the 123rd MPC press conference in Accra, Governor of the Bank of Ghana, Dr. Johnson Asiama, highlighted that the disinflation process has stalled in some countries.

On the domestic front, Dr. Asiama mentioned positive growth prospects and improved consumer and business confidence. The committee made the decision to raise the rate by 100 basis points to 28% by a majority vote.

While inflation is gradually easing, Dr. Asiama noted that it remains high at over 23%, with slow progress on a month-on-month basis. Structural drivers of food inflation persist, and external factors such as global tariff wars and geopolitical tensions could impact inflation, capital flows, and exchange rate stability.

Domestically, the fiscal outturn for 2024 was expansionary, exceeding program targets. Efforts towards consolidation in 2025 raise questions about their sufficiency for upcoming IMF program reviews. Financial conditions are rapidly evolving, with liquidity increasing, concerns raised by commercial banks on Capital Requirements Regulations (CRR) framework, and the need for a careful assessment of macrofinancial implications.

While private sector credit is showing nominal recovery, real credit growth remains modest. Non-Performing Loan (NPL) levels are a concern, and efforts are ongoing to stabilize the microfinance and rural banking sectors. Acknowledging past policy missteps, Dr. Asiama emphasized the importance of learning from these experiences to strengthen institutions and avoid repeating errors.

The challenges faced today underscore the significance of prudent monetary and fiscal policies, coordination, and structural reforms to ensure stability and credibility in the financial landscape.

Today’s immediate rate decision is not the focus; however, it will influence the broader monetary policy landscape in the medium term. As highlighted, there is a convergence of risks to address: stubborn inflation, elevated liquidity, soft real interest rates, a fragile fiscal recovery, and increasing external uncertainty. Despite these challenges, we are equipped with strong reserves, improving sentiment, and a credible policy framework to navigate through.

In the upcoming days, our objective is to carefully assess these factors and establish a policy stance that reinforces the disinflation trajectory while safeguarding the recovery and market expectations. The discussions ahead are expected to be open, evidence-driven, and in alignment with our shared goal of upholding price stability and fostering sustainable growth.

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