BTA2023 Bank of Ghana’s MPC to Begin First 2025 Meeting Amid Economic Challenges
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) is set to hold its first meeting of the year today, focusing on global economic developments, domestic economic conditions, and the appropriate monetary policy stance.
Key Determinants for Discussion
The meeting will take place against the backdrop of a policy rate of 27%, inflation closing 2024 at 23.8% (falling short of the government’s target of 15% and BoG’s 18% target), and ongoing economic pressures.
Major considerations include:
- Rising inflation, influenced by high food prices, utility tariff adjustments, and fuel price increases.
- The slight depreciation of the cedi, which disrupted the disinflation process in 2024.
- The BoG’s previous inflation projection, which adjusted the timeline for achieving the target band of 6-10% to Q4 2025, a shift from Q3 2025.
Persistent Economic Pressures
The conditions that led to the policy rate being maintained at 27% in November 2024 remain largely unchanged.
- Inflation has edged up from 23% in November to 23.8% in December, driven primarily by rising food costs.
- International crude oil price increases have forced upward adjustments in fuel prices.
- Utility tariffs have been revised, with indications of further hikes in the near future.
While the pace of cedi depreciation has slowed since the start of January 2025, uncertainty about the local currency’s stability persists.
Projection and Policy Rate Adjustments
Under current conditions, the BoG might consider a marginal increase in the policy rate to tame inflation. However, the central bank’s decision is likely to be influenced by the Mahama administration’s pro-business agenda, which prioritizes creating a friendly environment for private sector growth by reducing borrowing costs. Trade associations and industry leaders have expressed their desire for a reduction in the policy rate, which currently influences lending rates of 27.4%. According to Kwamina Asomaning, CEO of Stanbic Bank, the high-interest rate regime continues to weigh heavily on businesses.
Policy Rate Expectations
Analysts predict that the MPC may reduce the policy rate by 50-200 basis points, signaling the new government’s commitment to supporting businesses. Whether this aligns with fiscal policies spearheaded by Finance Minister Cassiel Ato Forson remains to be seen, as it could require prior consultation with BoG Governor Dr. Ernest Addison. As the meeting concludes, stakeholders will be keenly watching for policy signals that balance inflation control with fostering a stable and competitive business environment.
