The Bank of Ghana’s Monetary Policy Committee (MPC) raised the policy rate by 250 basis points, to 24.5%.
Since 2017, this has been the most significant rate rise.
The rate increase will make it more expensive to borrow money from banks, thus raising the cost of living and conducting business in the nation.
Speaking to the media, the Governor of the BoG, Dr. Ernest Addison, indicated that the committee made the choice in order to control the inflation rate as the nation bargains for an economic program with the International Monetary Fund (IMF).
“Inflation remains elevated and the balance of risks is on the upside. Although the forecasts are for monthly inflation to continue to slow down, the risks are on the upside, emanating largely from pass-through effects of the currency depreciation, the recent upward adjustment in utility tariffs, and rising inflation expectations”.
“The Committee remains committed to re-anchoring inflation expectations and returning to a disinflation path,” Dr Addison added.
The Bank of Ghana also stated that while medium- to long-term rates have remained comparatively behind the yield curve, short-term interest rates in the money market have mirrored recent developments.
For instance, the coupon rates on the 7-year, 10-year, 15-year, and 20-year instruments have remained unchanged at 18.1%, 19.8%, 20.0%, and 20.2%, respectively, while the discount rate on the 91-day instrument climbed from 12.5% in September 2021 to 29.7% in September 2022.
In line with the hike in the policy rate, the interbank market-weighted average rate increased to 22.05% in September 2022 from 12.61% in September 2021.
Banks’ average lending rates have also increased, rising from 20.20 percent in September 2021 to 29.81 percent in September 2022.
The interest policy rate has climbed by 9.5% since the Bank of Ghana first raised it in March 2022.
On March 25, 2022, the Central Bank raised the policy rate by 2.5% to 17%; it was then raised again on May 23, 2022, to 19%.
In August 2022, it was again raised by 300 basis points to 22%.
Adam Ibrahim
Adam is passionate about politics and issues that affect governance. As a writer, he channels his energies into writing on pertinent national and political issues for the good of the Ghanaian people.