“I must also emphasize the critical role of our post-meeting communiqué. It must clearly articulate the rationale behind our policy decisions and provide an accessible, transparent account of recent economic trends. This is essential for anchoring expectations and sustaining public trust in our commitment to price stability.”
This is the Governor of the Bank of Ghana, Dr. Johnson Asiama, underscoring a fact we have all come to accept: what the Bank of Ghana does and the timing of the action are important to the trajectory of the economy.
In March 2025, the Bank of Ghana increased the policy rate by 100 basis points to 28%, a decision the governor, Dr. Asiama, disclosed was arrived at through voting.
Speaking at the press briefing to announce the decision of the Monetary Policy Committee after a three-day meeting, Dr. Asiama said the decision to increase the policy rate to 28% was that of the majority of members of the committee.
It is unclear whether the members who dissented preferred a higher increase or the lowering of the rate.
The reactions to the decision came thick and fast, with many analysts agreeing with the decision but pointing out the impact it would have on interest rates.
Complaints over the cost of borrowing have persisted since the tenure of the erstwhile Governor of the Central Bank, Dr. Ernest Addison, the predecessor of Dr. Asiama.
Most analysts who agreed with the position of the Asiama-led MPC accept that it was the best way to tackle inflation.
Dr. Johnson Asiama referenced the uncomfortably high inflation, which is still above 20%, as the reason for the 28% rate.
Already, the Central Bank is counting the dividends of its last monetary policy decision, with inflation trending downwards and confidence in the economy growing.
This confidence is further boosted by an appreciating cedi, one of the key responsibilities of the BoG.
The dollar-to-cedi exchange rate on 22 May 2025 at the time of writing is GH₵11.8559 to a dollar, a feat that is attracting a lot of public attention and praise.
In his opening remarks at the beginning of the MPC meetings, Governor of the BoG Johnson Asiama painted a picture of the circumstances under which the meeting was being held.
“In March, the committee responded decisively to the inflation outlook by raising the policy rate by 100 basis points to 28 percent. Preliminary evidence suggests this action has contributed to
dampening inflation momentum. Importantly, the cedi has appreciated sharply by nearly 19 percent between April and May, helping to ease imported inflation pressures and restore public
confidence,” he stated.
Head of Research at the Center for Socioeconomic Studies Albert Wotorgbui believes the best move by the BoG for the third quarter is to maintain the policy rate at 28%.
Albert Wotorgbui believes this will help consolidate the gains made thus far.
Setting the tone for the discussions, the BoG Governor remarked, “Significant challenges persist. The inflation outlook, while improving, remains vulnerable to second-round effects, food supply constraints, especially from northern Ghana and the Sahel, and external price shocks, particularly given volatile global commodity markets.”
“Geopolitical tensions and evolving global trade dynamics, including the recent US-led tariff disputes, have heightened market uncertainty and could affect commodity prices, exchange rates, and financial flows in emerging markets like ours.”
The governor of the BoG further underscored that his outfit’s approach to reining in inflation is not limited to acting on the policy rate.
“The Bank has commenced a comprehensive review of its monetary policy implementation framework. We are transitioning from reliance on the unremunerated Cash Reserve Ratio to a more active Open Market Operations regime, including the use of longer-term BoG instruments. This shift is intended to enhance policy transmission, improve liquidity management, and allow greater room for credit expansion to the private sector.”
The recent history of the BoG speaks to the importance of this decision and how not applying this tool timeously can put the economy in a precarious position.
Story: Sena Nombo/radiogoldlive.com
