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Monetary Policy Update – December 2020

Monetary Policy Update – December 2020

Monetary Policy Rate (MPR) maintained at 14.5% for a fourth consecutive time amid signs of improved economic activity.

After the central bank’s accommodative stance which saw a decline in the policy rate by 150bps earlier this year in March, the Monetary Policy Committee (MPC) has kept the policy rate firm at 14.5% till date. At the just ended 97th MPC meeting, the MPC maintained its decision to keep the rate unchanged at 14.5% for a fourth consecutive time despite some improvement in macroeconomic conditions (stable exchange rate and easing inflation). The committee noted that inflationary pressures could arise from high budget deficit and financing needs of Government emanating from Covid-19 pandemic related expenditures.

Although inflation continues to ease towards the upper band of the medium-term target, there is a high risk to inflation outlook in the last quarter of the year due to election and Christmas related spending. Additionally, concerns still remain about Ghana’s rising public debt induced by Covid-19 related expenditures. This could cause fixed income investors to bargain for higher yields on government securities, thus an increase in interest rates.



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