BoG Adjusts Monetary Policy Rate At 24%
The Bank of Ghana has positioned its Monetary Policy Rate at 24 percent following the merger of its two key monetary policy instruments in controlling the country's inflation and money supply.
According to the central bank, it has merged its monetary policy rate and Reverse Repo Rate - the effective rate at which Bank of Ghana lends to commercial banks — as part of efforts to streamline its monetary operations toward a more transparent regime.
"The merged rate will continue to be referred to as the Monetary Policy Rate and be positioned at 24 percent. This merger is to ensure transparency in the monetary policy stance of the Bank of Ghana," a statement issued by the central bank said.
At the end of the last Monetary Policy Committee meeting in July, the central bank maintained its policy rate - which signals interest rate trends - at 22 percent.
But the central bank says it does not expect banks to adjust their lending rates accordingly with the change in monetary policy regime, as the Bank of Ghana itself has kept the rate at which it lends to commercial banks.
The central bank explained: "These changes, in effect, do not reflect a change in monetary policy stance, since the maximum lending rate of the Bank of Ghana remains unchanged at 25 percent".
The Bank of Ghana has also introduced a seven-day Reverse Repo (lending) Facility, available to all banks to help them manage liquidity more effectively.
According to the Bank of Ghana, the Reverse Repo Facility will be the principal instrument through which the central bank injects liquidity into the banking system during periods of general liquidity shortage.
The attempt by the Bank of Ghana to have absolute control of money circulating in the country reflects the continued rise in inflation, which is of grave concern to managers of the economy and necessitates the Bank of Ghana reducing demand for credit facilities.
Inflation for the month of June increased to 17.1 percent, up marginally from 16.9 percent recorded in May this year. The depreciating cedi has fuelled import inflation, threatening the government's end of year inflation target of 13.7 percent.