BoG maintains policy rate at 29%

• Dr Ernest Addison

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has maintained the policy rate at 29 per cent, citing economic stability.

The policy rate is the rate at which the BoG lends to commercial banks.

Dr Ernest Addison, the Governor and Chairman of the MPC, who disclosed this in Accra yesterday after the regular 117th meeting of the MPC, said the Committee considered improvement in the domestic and global economy influenced the decision of the Committee.

In the domestic economy, Dr Addison said the growth outturn for 2023 was stronger relative to target.

He said the fourth quarter Gross Domestic Product (GDP) growth of 3.8 percent was driven by all services, agriculture and industry.

The updated Composite Index of Economic Activity (IEA), the high-frequency real sector indicator, also improved further in January, following the upturn in December 2023, affirming the rebound in economic activity.

That, Dr Addison said, was supported by broad improvements in sentiments, amid improvement in the Purchasing Money Index (PMI) reflecting some uptick in business purchasing activity and new orders.

The Governor indicated that headline inflation had remained broadly stable since December 2023.

He explained that headline inflation declined to 23.2 percent in February, down from 23.5 percent recorded in January 2024.

He said the decline was broad-based, with food inflation down by 0.1 percentage point to 27.0 percent, while non-food inflation declined to 20.0 percent.

“Core inflation also slowed down, indicating continued broad-based easing in underlying inflationary pressures. The Bank’s core inflation measure, which excludes energy and utility, continued to decline to 24.0 percent in February 2024,” Dr Addison stated.

Commenting on the new policy rate, an Economist and a Lecturer at the University of Ghana, Dr AduOwusuSarkodie, said, “He wasn’t surprised at the new rate.”

He said the new policy rate was necessary to control inflation, adding that the uncertainties in the global economy weighted by the tensions in the middle necessitated the stay of the policy rate.

Dr Sarkodie said though cheap credit was good crucial for the private sector through the easing of the policy rate, it was equally important for inflation to be controlled so as to preserve the strength of the local currency and capital of businesses

BY KINGSLEY ASARE