The Bank of Ghana (BoG) has raised its key interest rate from 24.5 per cent to 27 per cent.
On Monday, Ernest Addison, Governor of BoG, told reporters in Accra that the move is intended to steady citizens’ fears of rising prices.
The West African country saw its highest inflation rate in 20 years in October when it reached 40.4%.
“The committee is of the view that significant upside risks to the inflation outlook remain. To continue to anchor inflation expectations, the committee decided to increase the policy rate by 250 basis points to 27.0 per cent,” he said.
Addison, who is also the bank’s monetary policy committee chairman, has predicted that inflation will reach its highest point in the first quarter of 2023.
He also said that if the current policy stance is kept, inflation could reach a 25 per cent average by the end of 2023.
Addison predicted that inflation would reach its highest point in the first quarter of 2023 and then level off at roughly 25% by the year’s end.
“This forecast is conditioned on the continued maintenance of a tight monetary policy stance and the deployment of tools to contain excess liquidity in the economy.
“There are some risks to this forecast that would have to be monitored, including additional pressures from the proposed VAT increase and exchange rate pressures.
“Continued vigilance to the evolution of these potential price pressures in the outlook will be key.”
The Ghanaian government had previously indicated that it would utilise gold to purchase imported oil products amid the country’s foreign exchange crisis.
An aid package is being negotiated with the International Monetary Fund (IMF), and the country expects to secure it before the end of the year.