The Bank of Ghana has taken a significant step to improve its monetary policy formulation process by adopting a majority vote decision process, similar to other major central banks.
This change aims to enhance transparency and accountability in the policymaking process.
According to the Bank, the Monetary Policy Committee (MPC) members will now publish their decision statements, providing insight into their preferred direction for the policy rate.
This move is expected to promote a more open and transparent decision-making process.
The MPC members recently convened for the 123rd MPC meetings, where they voted to increase the Monetary Policy Rate (MPR) by 100 basis points to 28.0 percent.
This decision was made to reinforce the Bank’s commitment to ensuring price stability.
MEMBER 1 stated, “The analysis suggests that the balance of risk is tilted more on the upside to inflation… I vote for a hike in the policy rate by 100 basis points to 28.0 percent.”
This sentiment was echoed by MEMBER 2, who noted, “The fact that inflation has stayed around 23.0 percent is not acceptable… I vote for an upward adjustment in the policy rate by 100bps.”
The MPC members emphasized the need to address the current inflation inertia, which has seen inflation rates remain stuck around 23.0 percent.
MEMBER 2 highlighted the emergence of financial repression on the money market, excess liquidity conditions, and the need for stronger fiscal consolidation efforts to reset inflation expectations.
MEMBER 3, however, argued that the monetary policy rate should be maintained at 27 percent for longer.
“Headline inflation is projected to remain high in Q2 2025 but decline over the medium term… Given the various policy rate scenarios presented by staff, I firmly believe that staying put for longer will deliver a more stable path to a sustained decline in inflation towards the medium-term target.”
The Bank also announced plans to introduce a 273-day instrument to augment its existing sterilization toolkit, intensify monitoring of banks’ Net Open Positions, and review the current structure of the Cash Reserve Ratio.
These measures aim to strengthen liquidity management and enhance monetary policy transmission.
MEMBER 4 emphasized the need for caution, stating, “The heightened uncertainty will likely dampen global growth, adversely impact the disinflation process, and, in turn, financing conditions for Emerging Markets Economies.”
MEMBER 5 also expressed concerns about the inflation trajectory, noting, “A mix of downside and upside risks are shaping the inflation trajectory… I consider risks to the inflation and growth outlook to be balanced.”
The MPC members’ decision statements provide valuable insight into the complexities of monetary policy decision-making.
The next Monetary Policy Decision Statement will be published after the MPC meetings in May 2025.
-BY Issah Olegor
