A senior lecturer at the University of Ghana Business School, Dr. Agyapomaa Gyeke-Dako says the Bank of Ghana made the best decision by raising the Monetary Policy Rate by 300 basis points from 19 percent to 22 percent.
The central bank made the decision after a Monetary Policy Committee meeting on Wednesday because of Ghana’s recent economic challenges.
The last change in the policy rate was in May 2022 and was maintained in July 2022.
In an interview on the Citi Breakfast Show, Dr. Agyapomaa Gyeke-Dako said the move by the Bank of Ghana is timely.
“We all understand that much of the inflation we are experiencing is coming from the supply side, given that we are having issues with fuel prices, market prices of oil, and many others. There is however a role that demand can play to bring down inflation. To tackle inflation from the demand side, we can increase our production capacity.”
“We know that the issue will take a while to be addressed. But in the interim, what the Bank of Ghana can do is to bring inflation down, and that can be achieved through increasing the policy rate. As we can see, the Bank of Ghana has moved to increase the policy rate. I think that this is timely, especially in the face of high food and non-food inflation. This is going to mop up liquidity in the country.”
She believes that aside from tackling inflation, the Bank of Ghana’s move was to send a strong signal to investors that the current economic challenges are being tackled.
She is confident this move will go a long way to stabilise the economy “at least in the short-term”.
Dr. Agyapomaa Gyeke-Dako said this move will prevent investors from reversing their capital.
“People will also stop speculating because once people hear that the Central Bank is taking measures to address the depreciation of the cedi, much of the speculations will cease, and we know that speculation is a major contributor to the state we find ourselves now.”
The University of Ghana Business School Lecturer is looking forward to a turn-around in the shortest possible time.”