Ghana increases benchmark interest rate to relieve inflationary pressures

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People walk past the Bank of Ghana in Accra, Ghana. Photo by: REUTERS / Zohra Bensemra
Bank of Ghana

Ghana’s central bank announced an increase of 250 basis points in its benchmark policy rate to 27 percent Monday to rein in surging inflation and the continued depreciation of the local currency.

Governor of the Bank of Ghana Ernest Addison announced the decision at a press briefing after the 109th Monetary Policy Committee (MPC) meeting.

This decision came after a similar increase on Oct. 7, which took the rate to 24.5 percent as exchange rate depreciation and inflation remained volatile.

“The MPC is of the view that significant upside risks to the inflation outlook remain. To anchor inflation expectations, the committee decided to increase the policy rate by 250 basis points to 27 percent,” Addison said.

Addison said that the policy rate increases in the past few months had helped dampen the pace of monthly price increases as the monthly inflation number eased from a peak of 5.1 percent to 1.9 percent.

However, he said this development reversed in September and October due to additional shocks from an upward adjustment in ex-pump petroleum prices, utility tariff adjustments, and transportation fare increases.

The governor said the reversal of the effects had led to the 40.4 percent inflation rate reading in October “with significant underlying inflation pressures and upside risks to the inflation outlook.” Enditem

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