The benchmark interest rate set by the Bank of Ghana (BoG) has increased from 24.5 percent to 27 percent.
Ernest Addison, governor of BoG, said the choice is anticipated to stabilise inflation expectations in the nation while speaking with journalists in Accra on Monday.
The West African nation’s inflation rate increased to 40.4 percent in October, the highest level in 20 years.
“The committee is of the view that significant upside risks to the inflation outlook remain. To continue to anchor inflation expectations, the committee, therefore, decided to increase the policy rate by 250 basis points to 27.0 percent,” he said.
The country’s inflation is anticipated to reach its high in the first quarter of next year, according to Addison, who also serves as the chairman of the bank’s monetary policy committee.
If a strict policy stance was maintained, the inflation rate may stabilise at about 25% by the end of 2023, he continued.
“The inflation forecast shows that in the outlook, inflation will likely peak in the first quarter of 2023 and settle at around 25 percent by the end of 2023,” Addison said.
“This forecast is conditioned on the continued maintenance of tight monetary policy stance and the deployment of tools to contain excess liquidity in the economy.
“There are, however, 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 declared plans to utilise gold to purchase imported oil goods in the midst of the nation’s currency crisis.
Additionally, the government is attempting to get a financial aid package from the International Monetary Fund (IMF) by the end of the year.
Meanwhile, the Vice President of Ghana, Mahamudu Bawumia said on Thursday that the Ghanaian government is working on a new policy to trade its gold reserves for petroleum products rather than US Dollars.
The move to buy petroleum products with Ghana’s mined gold will be one of the most strategic changes in the country’s economic policy since its independence from British colonial rule.
The vice president added he hoped the new system would be fully operational by the end of the first quarter of 2023.
Ghana produces crude oil, but since its sole refinery shut down due to a 2017 explosion, it has been reliant on imports for refined oil products.