BoG to maintain policy rate at 14.5 percent—IEA predicts

BoG to maintain policy rate at 14.5 percent---IEA predicts
Dr. John Kwakye, Director of Research at the IEA

Ahead of the conclusion of the Bank of Ghana’s 104th Monetary Policy Committee (MPC) meeting, the Institute of Economic Affairs (IEA) is forecasting that the benchmark interest rate will be held constant at 14.5 percent.

Speaking during a round-table discussion on the theme: “Making Monetary Policy in Ghana More Fit-for-Purpose”, Director of Research at the Institute, Dr. John Kwakye said despite rising  inflation, driven by high food and fuel prices, supply bottlenecks, as well as upwards exchange rate pressure, he believes the Committee would not raise the rate.

“Looking at the balance of risk between inflation and growth, my judgement is that the inflation risk outweighs the growth risk at this time, and on that score, you would say that the policy rate should be adjusted upwards. However, recalling that the rate was increased by 100 basis points just two months ago, at the last meeting, the likelihood of another increase is low,” he explained.

“My expectation is that the Committee will play it safe by holding the rate as it is,” adding that this will allow the Committee some time, until its next meeting, to have a clearer picture of the inflationary trend and take a decision accordingly.

As central banks, the world over, grapple with the decision of increasing rates to quell rising inflation, some analysts are advising against sharp decisions, arguing that the noise from the Yuletide-related demand as well as improved economic performance will moderate inflation downwards as the year progresses.

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