BoG surprises with first rate hike since July 2023

The central bank raised its main interest rate by 100 basis points to 28%. This decision was made on Friday. The impact on consumer inflation will be reassessed before the next meeting in May.

Many observers did not expect this rate hike. A majority of economists polled by Reuters predicted rates would remain steady. They cited high inflation and a weak currency as reasons.

This is the first interest rate increase since July 2023. The bank stated that a tight stance is necessary to lower inflation. New central bank governor Johnson Asiama announced the decision during a news conference.

He mentioned that the decision was made by most members of the monetary policy committee. Although headline inflation has slightly decreased, it remains concerning. Both food and non-food inflation are above expectations, and core inflation is still high.

Consumer price inflation slowed to 23.1% in February from 23.5% in January. This decrease was due to easing food and non-food prices. However, it is still well above the Bank of Ghana's target of 8%, with a margin of error of 2 percentage points.

Asiama noted that if inflation stabilizes, the committee may consider easing policies gradually. At his first monetary policy committee meeting on Monday, he acknowledged that inflation remains uncomfortably high.

Economist Leslie Dwight Mensah described this move as surprising but necessary against rising inflation. He believes markets will find it reassuring, though households and firms may be disappointed.

Ghana is recovering from its worst economic crisis in decades. The country faces challenges in its cocoa and gold industries, which are critical for its economy. Finance Minister Cassiel Ato Forson stated that spending cuts could reduce inflation to