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Ghana Monetary Policy January 2023

Ghana: Central Bank hikes policy rate by an additional 100 basis points in January

At its meeting on 30 January, the Monetary Policy Committee of the Bank of Ghana (BoG) raised its policy rate by 100 basis points to 28.00%, a smaller increase than the 250 basis point hike in November. This brought the cumulative increase to 1,450 basis points since the tightening cycle started in November 2021.

The hike was driven by sharply rising inflation. In December, price pressures accelerated for the 19th consecutive month to 54.1% (November: 50.3%)—the highest figure since April 2001—while core inflation rose to 53.2%. This highlighted significant underlying inflationary pressure, cementing the Bank’s decision to increase the main rate.

Nevertheless, the BoG highlighted that inflation expectations were waning in December. This, along with a more stable cedi amid the stabilizing effect from scheduled IMF support, likely justified the smaller hike.

The Bank did not outline clear forward guidance in its communiqué. It reiterated its commitment to returning inflation to a downward path but did not lay out potential future policy rate decisions or inflation risks. However, it did maintain that the current debt restructuring talks will help “restore fiscal and debt sustainability and bring down inflation, as well as help stabilize the currency”.

Commenting on the outlook, analysts at EIU said:

“The BoG will raise rates throughout 2023, with the policy rate expected to reach 32.50’% at end-2023. Following this, the rate will be held steady (albeit at a high level) in 2024 as inflation slows. Inflation will remain well above the BoG’s target range (of 6-10%) throughout 2023-24, before falling into the middle of the band from 2025 onwards.”

The next meeting is scheduled for 22-24 March 2023, with the decision to be announced on 27 March.

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