The Bank of Ghana (BoG) has raised the policy rate by 250 basis points to 24.5 per cent. The Governor of the Bank of Ghana, Dr Ernest Addison announced the rate hike on October 6, 2022 when he addressed the media.
The rate hike is the second highest in the bank’s history and is meant to fight price pressures, with inflation almost at 40 per cent.
The BoG Governor said the increment was also meant to contain capital outflows which could worsen the cedi’s depreciation.
The press conference was to announce the decision of the bank’s Monetary Policy Committee (MPC) after it concluded its regular meetings in September 2022.
The press conference was initially due to take place in the last week of September but shifted forward to allow for broader consultation with the visiting team from the International Monetary Fund, BoG said in an earlier statement.
The latest BoG high frequency indicators signalled some moderation in economic activity. According to the Central Bank, the Composite Index of Economic Activity (CIEA) recorded an annual growth of 0.5% in July 2022, compared to 1.6% in June 2022, and 5.0% in December 2021.
The sources of the slowdown, it said, were from construction and port activities. Also, results from the Bank’s August 2022 confidence surveys showed further softening of business and consumer sentiments.
While consumer confidence dipped on account of rising inflation, business sentiments softened on the back of concerns about price pressures, currency depreciation, and weakening consumer demand.
The survey findings were broadly in line with an observed downturn in Ghana’s Purchasing Managers’ Index (PMI) in August 2022.
Likewise, the latest credit conditions survey conducted in August 2022 indicated an overall net tightening of credit stance to corporates and households by the commercial banks. This was reflected in the steady increase in average lending rates.
This notwithstanding, new advances increased by 56.1% year-on-year to ¢33.8 billion in August 2022, relative to a 4.9% increase in August 2021.
Annual growth in private sector credit was 35.8% in August 2022, compared with 9.6% a year ago.
In real terms, private sector credit increased, albeit marginally, to 1.4% due to sustained price pressures. This compares with a contraction of 0.2% over the same period in 2021.
Source: Graphiconline & Myjoyonline
