The Bank of Ghana has brought its Monetary Policy Committee (MPC) meeting forward by a week to Wednesday, March 16, 2022 to Friday, March 18, 2022.
This is due to the threats of the rising inflation and exchange rate depreciation on the Ghanaian economy.
Already, prices of some goods have skyrocketed because of the soaring fuel prices which has pushed transport and imported inflation up as a result of the cedi’s depreciation.
It is expected that the MPC of the Bank of Ghana will increase the Policy Rate – the rate at which it lends to commercial banks – by about 100 basis points to be able to control inflation and reduce the rapid fall in the value of the cedi.
An increase in the policy rate will mean cost of credit or loans will go up, but investors will be enticed to invest in financial instruments such as the Treasury bills than buying dollars for future gain.
During the last meeting, the MPC kept the policy rate at 14.5%, after going up by 1% in November 2021, the first time in six years.
Chief Finance Officer of the Valley View University, Dr. Williams Peprah, earlier told Joy Business the Bank of Ghana should increase interest rates in the country to help stop the free fall of the Ghana cedi.
According to him, increasing interest yield will entice investors to purchase more government securities and help slowdown the depreciation of the cedi, despite the difficulty it will bring to the economy.
“When a country’s currency is suffering from devaluation, as we have experienced in Ghana in the first 2 months of the year, where we have the worst performing currency, the only alternative to stop the devaluation is from increasing interest rates in the country”.
“What it means is that instead of investors or citizenry not having confidence in the currency but to purchase dollars or foreign currency for savings, government will entice them with an increase in interest rates; so that they will purchase government bonds and government securities”, Dr. Peprah pointed out.
Some of the key issues that are expected to dominate the three-day MPC meeting will include the extra measures to be implemented to check the rising inflation rate over the past four months.
Also, the committee will explore other measures to address the volatility of the Ghana cedi against the US dollar.
It will also review some business risk factors as well as proffer advice to the central government on measures to tackle the nation’s rising debt and address the fiscal imbalance.