Steve Hanke, a professor of applied economics at Johns Hopkins University, expects interest rates in Ghana will rise despite the Bank of Ghana's Monetary Policy Committee's decision to maintain the Policy Rate (PR) at 19%.
At the MPC press conference in Accra on Monday, July 25, Governor of the BoG Dr. Ernest Addison said that the rate will remain at 19 percent.
He explained that the decision was made to let the central bank continue to monitor how the earlier announced policy measures to address the economic issues will turn out. The BoG Chief said that the Committee has noticed that the inflation rate had continued to rise. A thorough analysis of the consumer basket revealed that, while being originally driven by supply side shocks, the first relative price increases had nearly completely spread to every item in the basket.
According to Dr. Addison, "almost 80% of the basket's goods showed inflation above 20%."
The Bank's consumer and corporate surveys found that expectations and perceptions of inflation have grown, which has encouraged workplace agitations for cost-of-living allowances. "Over the past six months, the Bank of Ghana has aggressively responded by using its policy instruments to raise the policy rate by a total of 550 basis points, and tightened liquidity conditions by basis points since November 2021. The Committee also took notice of the slowed rate of rise in
in the most recent reading.
The macroeconomic framework that will support an agreed-upon IMF-supported plan is anticipated to provide a tighter coordinated monetary and fiscal policy framework that will anchor stability and avoid a wage-price spiral, which will cause inflation to become more ingrained.
"The Committee believed that it would be wise to take a break and assess the effects of the most recent monetary policy measures already implemented. As a result, the committee chose to keep the Monetary Policy Rate at 19%, according to Governor Addison.
The Bank of Ghana paused interest rate increases in response to indicators that inflation is "levelling off," according to a tweet from Prof. Hanke. Official inflation in the GHA is 29.8% per year, a 19-year high. Nowhere near. "Today, I estimate inflation to be 54 percent per year, or around 1.8 times the fictitious official rate. Therefore, interest rates will increase.
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