Ghana MPC hikes MPR by 150bps to 29.5%

Ghana's Monetary Policy Committee (MPC) recently made a significant decision to hike the Monetary Policy Rate (MPR) by 150 basis points to 29.5 per cent in a bid to rein in inflation. Richmond Frimpong, a Financial Advisory Consultant, shed light on the implications of this move in a recent interview on CNBC Africa. Frimpong highlighted that the Bank of Ghana's primary goal is inflation targeting, with a target range of plus or minus 8 percent. Given the current inflation rate significantly exceeding this target, it was unsurprising to see the MPC take action. He emphasized that the hike in the policy rate was a step towards mopping up excess cash from the system to combat inflation. Frimpong also indicated that the trend of increasing the policy rate may continue to align with the MPC's targeting approach, especially considering inflation's recent downtrend. However, he acknowledged the associated costs of tightening monetary policy, particularly in terms of reduced access to credit for the private sector. This could hinder the growth of sectors like manufacturing and have implications for GDP growth. The interview also delved into the potential impact of Ghana's IMF bailout program on the economy. While the IMF program aims to bring stability to the balance of payments and restore credibility, Frimpong cautioned that it may not address all the underlying issues plaguing the economy. He stressed the importance of leveraging the IMF support to drive fundamental changes, particularly in revenue mobilization and industrial expansion. Frimpong's insights underscore the need for Ghana to focus on restructuring its economic fundamentals to stimulate growth and address longstanding challenges. By prioritizing areas like revenue generation, industrial development, and international trade, Ghana can work towards building a more resilient and sustainable economic framework.