It is emerging that two out of the five members of the Monetary Policy Committee (MPC) of the Bank of Ghana voted against the decision to increase the policy rate by 100basis points.
This led to increase in the policy rate from 27% to 28%.
Although the majority decision carried the day and was announced by the Governor of the Bank last week, the two dissenting views justified why they advocated for the policy rate to be maintained at 27%.
Their opposition, grounded in concerns over economic growth, inflation dynamics, and the real impact of previous hikes, signals a broader debate over the trajectory of Ghana’s monetary policy.
Let’s take a look at what the two members said.
Member 3
The member voted against the 100-basis-point rate hike, arguing that maintaining the Monetary Policy Rate (MPR) at 27% would provide a more stable path for inflation reduction in the medium term. They contended that the current economic conditions, both domestically and externally, supported a steady policy stance rather than further tightening.
On the external front, the Ghana cedi has remained relatively stable, buoyed by improved remittance inflows, increased gold exports, and the Bank of Ghana’s Gold for Reserves programme. Additionally, the balance of payments has performed strongly, with higher foreign reserves surpassing IMF targets, providing a crucial buffer for currency stability. These developments indicate that external pressures on inflation and exchange rate volatility are easing, reducing the urgency for a rate hike.
Domestically, the disinflation process is progressing, with headline inflation declining for two consecutive months, although it remains above the target range. Market liquidity has also improved, and the Bank of Ghana’s existing liquidity management tools should be sufficient to control excess liquidity without resorting to an immediate rate increase. This suggests that monetary tightening may not be necessary at this stage to sustain the disinflationary trend.
Economic growth has also shown resilience, with GDP expanding by 5.7% in 2024, reflecting a rebound in real sector activities, particularly in mining, ICT, and construction. Consumer and business confidence is improving, as evidenced by declining inflation expectations. This growing optimism signals trust in the effectiveness of current monetary policy measures, further reinforcing the argument against additional tightening.
However, food inflation remains persistently high due to supply-side constraints. The member emphasized that addressing these challenges requires structural interventions rather than monetary policy adjustments. Tackling food supply issues should be a priority for policymakers and other stakeholders to support the overall disinflation process without hampering economic growth.
In conclusion, the member believes that holding the policy rate at 27% for a longer period would allow for a gradual and sustained decline in inflation while maintaining economic stability and growth momentum. They argue that the stability of the cedi and improved foreign reserves provide enough policy space to delay further monetary tightening, ensuring a balanced approach to price stability and economic expansion.
Member 5
This member opposed the 100-basis-point hike, arguing that keeping the policy rate at 27% would achieve a better balance between price stability, financial stability, and economic growth.
Headline and core inflation, he argued are gradually declining, although they remain above the target range. The existing tight monetary policy, coupled with exchange rate stability and fiscal consolidation, is already helping to reduce inflationary pressures. While high food inflation persists, it is expected to be outweighed by broader disinflationary forces, making an additional rate hike unnecessary.
The external sector has shown strong performance, driven by a surge in exports that has improved the current account balance and contributed to exchange rate stability. The Bank of Ghana’s Gold for Reserves programme has further strengthened foreign exchange reserves, boosting investor confidence in Ghana’s debt and equity markets. These developments suggest that external economic conditions are becoming more stable, reducing the need for an immediate rate increase.
On the domestic front, GDP growth accelerated to 5.7% in 2024, with strong economic activity continuing into 2025. Private sector credit growth has turned positive, rising to 3.1% in February 2025, a significant improvement from the contraction experienced in the same period of 2024. In the banking sector, liquidity and profitability have improved, though challenges remain with non-performing loans and capital adequacy.
Looking ahead, the risks to inflation and economic growth appear balanced. Disinflationary factors such as tight monetary policy and exchange rate stability are expected to outweigh inflationary risks stemming from food supply constraints. He therefore maintained that rather than raising rates, the Bank of Ghana should consider deploying other monetary tools to reinforce its tight policy stance while ensuring economic stability.
In the member’s conclusion, the member believes that holding the policy rate at 27% will help maintain a delicate balance between controlling inflation and sustaining economic growth. Keeping rates steady will also allow other monetary policy measures to support financial stability without unnecessarily constraining economic activity.
The Case of the Three
However the other three members made a firm decision to raise the policy rate as part of the Bank’s efforts to restore price stability in the economy. Inflation, they admitted, has been reducing in recement months but remained “stubbornly high”, fueled by several factors. Globally, the economic environment has become more uncertain due to rising interest rates, trade conflicts, and geopolitical tensions, the Governor Dr. Johnson Asiamah explained in a press statement. These global issues have affected investor confidence softened business sentiment, and pushed up inflation expectations, especially in emerging markets like Ghana.
Locally, the economy has shown signs of recovery with GDP Growth exceeding expectations in 2024. However, despite this growth, inflation remains sticky, particularly food inflation, which has been worsened by adverse weather conditions affecting crop yields. The Bank noted that although inflation has marginally eased, the current rate is still well above the target, requiring further policy tightening.
The new practice of publishing the decision of members of the committee is one of the initiatives of the new Governor, Dr. Johnson Asiamah. The governor says this is part of his initiatives to enhance transparency and accountability in the decision of the bank. The, he also says, is to enhance the credibility and the confidence in the Central Bank.
