The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has increased the policy rate by 300 basis points to 22%.
The increase in the key rate follows an emergency Monetary Policy Committee (MPC) meeting held by the Central Bank on August 17, 2022.
It also comes at a time when the country is struggling with a continuous increase in the rate of inflation, an acceleration in the pace of the depreciation of the cedi, as well as two downgrades of the economy from two international ratings agencies.
The rate, which is of keen interest to businesses, signals the rate at which the Central Bank will lend to commercial banks.
In a statement issued by the Central Bank, it noted that the move is part of measures to address the risks to the inflation outlook.
The MPC also took additional measures including raising the primary reserve requirement of banks from 12% to 15%. This is to be implemented in a phased manner.
Therefore, the reserve requirement will go up to 13% from September 1st, 2022, and subsequently to 14% by October 1st, 2022, and then 15% by November 1st, 2022.
The Bank of Ghana also noted that to boost the supply of foreign exchange to the economy, it is working collaboratively with the mining firms, international oil companies, and their bankers to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining, and oil and gas companies.
This it believes will strengthen the central bank’s foreign exchange auctions, and consequently the cedi.
Already, for many stakeholders, the latest move will send borrowing costs higher.