Ghana’s central bank hikes interest rate to 27% as inflation bites harder

The Bank of Ghana (BoG) has increased its benchmark interest rate from 24.5 percent to 27 percent.

Speaking with journalists in Accra on Monday, Ernest Addison, governor of BoG, said the decision is expected to anchor inflation expectations in the country.

In October, inflation in the West African country hit 40.4 percent — its highest rate in 20 years.

“The committee is of the view that significant upside risks to the inflation outlook remain. To continue to anchor inflation expectations, the committee, therefore, decided to increase the policy rate by 250 basis points to 27.0 percent,” he said.

Addison, also the chairman of the bank’s monetary policy committee, said the country’s inflation is forecast to peak in the first quarter of next year.

He added that inflation could settle at around 25 percent by the end of 2023 if a tight policy stance was maintained.

“The inflation forecast shows that in the outlook, inflation will likely peak in the first quarter of 2023 and settle at around 25 percent by the end of 2023,” Addison said.

“This forecast is conditioned on the continued maintenance of tight monetary policy stance and the deployment of tools to contain excess liquidity in the economy.

“There are, however, some risks to this forecast that would have to be monitored, including additional pressures from the proposed VAT increase, and exchange rate pressures.

“Continued vigilance to the evolution of these potential price pressures in the outlook will be key.”

Amid the country’s forex exchange crisis, the Ghanaian government had announced plans to use gold to buy imported oil products.

The country is also negotiating an aid package with the International Monetary Fund (IMF) and is hoping to secure it by the end of the year.