Bank of Ghana keeps policy rate at 14.5%

This is the second time that the Bank of Ghana (BoG) has kept the policy rate unchanged at 14.5% this year.

The monetary policy committee (MPC) of the Bank of Ghana (BoG) has kept the policy rate unchanged at 14.5%.

Speaking at a virtual press conference on Monday, Dr Ernest Addison, governor of the Bank of Ghana (BoG), said this was due to growth concerns.

He said the BoG needs still more time to look at the impact of current development on reserves and the banking sector.

In March, the BoG lowered the policy rate by 150 basis points, from 16% to 14.5%. It was the first time since 2019 that the central bank had lowered the policy rate.

Dr Addison said, “The MPC noted that the COVID-19 pandemic has pushed public finances out of the path of fiscal consolidation. The fiscal deficit is estimated to expand to 11.4% of GDP by the close of the year.

“The huge financing gap brought about by the expanded deficit could exert pressure on public debt, with long-term implications for the economy.”

He went on, “While the government stimulus package for various sectors of the economy, including micro, small and medium-sized enterprises, is in the right direction to boost economic activity, the Committee’s view was that going forward, the 2021 Budget should be focused on instituting measures to return to the fiscal consolidation path with a view to building resilience and strengthening the pillars of the economy for a return to macroeconomic stability.”

The Bank of Ghana’s latest forecast shows that inflation is currently above its upper limit, driven mostly by food prices.

The central bank projects a return of inflation to the medium-term target band by the second quarter of 2021, conditional on corrective fiscal measures being introduced in the near term.

IMF’s forecast

The International Monetary Fund has revised downwards its initial global growth forecast from a contraction of 3.0% to 4.9% in its June release of the World Economic Outlook update.

The pandemic has had a more negative impact in the first half of 2020 than anticipated and the recovery is projected to be more gradual than previously projected.


On the domestic scene, there has been some pressure on headline inflation. After remaining flat at 7.8% in the first quarter, inflation jumped to 11.2% in the second quarter.

This sharp increase was driven in large part by food prices, which spiked in response to the panic-buying episode preceding the partial lockdown that was announced at the end of March 2020.

Food prices continued to increase from 8.4% at the end of the first quarter to 13.9% at the end of the second quarter of 2020.

Non-food inflation also rose from 7.4% to 9.2%, but this increase has happened at a much slower pace than food prices.

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