The Bank of Ghana has announced new monetary policy measures, including the introduction of a 273-day instrument and a review of the Cash Reserve Ratio (CRR), to tighten liquidity control and enhance policy transmission. This comes as the Monetary Policy Committee (MPC) raised the policy rate by 100 basis points to 28%, citing persistent inflationary pressures and concerns over the government’s expansionary fiscal stance.

Addressing the press at the conclusion of the 123rd regular MPC meeting, Governor Dr. Johnson Asiama emphasized the need for decisive action to stabilize inflation and restore economic confidence.

“The fiscal stance in 2024 was expansionary, leading to significant fiscal impulses and a liquidity overhang. This excess liquidity poses risks of spilling over into other segments of the economy and could derail the disinflation process. It is critical that monetary policy remains tight to contain these risks and ensure price stability.”, Dr. Asiama noted.

To reinforce its policy stance, the Central Bank says it will introduce a 273-day instrument as part of its liquidity sterilization efforts. Additionally, it will review the structure of the Cash Reserve Ratio (CRR) to assess its broader impact on liquidity conditions and financial intermediation.

“The Committee also decided to introduce a 273-day instrument to augment the existing sterilization toolkit and review the current structure of the Cash Reserve Ratio to strengthen liquidity management,” the Governor explained.

Despite a marginal decline in headline inflation, the central bank noted that food and non-food inflation remain above expectations, and core inflation is still elevated, resulting in its decision to hike the policy rate to 28%.