The Monetary Policy Committee (MPC) of the Bank of Ghana is set to hold its 123rd Regular Meeting from Monday, March 24, 2025, to Wednesday, March 26, 2025, to review developments in the economy under the chairmanship of the newly appointed Governor, Dr. Johnson Asiama.
The meeting is expected to conclude its work and announce the decision of the Committee to Ghanaians at a press conference to be held on Friday, March 28, 2025.
It’s unclear which areas the Governor and his Team will focus on but reviewing developments in the economy has to do with the process of examining and analyzing the changes, trends, and progress within a country’s economy over a specific period-preferably the last quarter of the 2024 financial year.
Meanwhile, The MPC will be assessing the current economic indicators such as Gross Domestic Product (GDP), the growth rate, the inflation rate, the unemployment rate, the interest rates, the trade balances, and the country’s level of debt and if all these posts any risk to the wellbeing of the economy at large.
They will also be examining the performance of various sectors of the economy like agriculture, industry, services, and manufacturing relative to evaluating policy interventions to review the impact of government policies, regulations, and reforms on the general economy.
It will look at opportunities, and challenges in the economy to benchmark current economic performance against historical data if possible last year to identify progress, stagnation, or decline in the economy.
The general goal of reviewing economic developments is to help enhance economic forecasting and prediction, to understand the economy’s current state and direction, to identify areas for improvement and potential opportunities that will inform policy decisions and strategic planning
The main objective of the Bank of Ghana is to maintain stability in the general level of prices, as stated under section 3 of the Bank of Ghana Act 2002, (Act 612), as amended.
In addition to price stability, the Bank is enjoined to support the general economic policy of the Government, promote economic growth and development, ensure effective and efficient operation of the banking and credit system; and contribute to the promotion and maintenance of financial stability.
On the conduct of monetary policy, the BoG Act 2002, Act 612 as amended, section 27, established a Monetary Policy Committee (MPC) responsible for the formulation of monetary policy of the Bank.
The members of the Monetary Policy Committee are:
- The Governor,
- The First and Second Deputy Governors,
- The Head of the Department responsible for economic research of the Bank,
- The head of the Department responsible for Treasury operations of the Bank, and
- Two external members – not employees of the Bank and appointed by the Board – with knowledge and experience, which is relevant to the functions of the Monetary Policy Committee.
The Governor of the Bank of Ghana chairs the seven-member Monetary Policy Committee, which meets bi-monthly over three days to assess current economic conditions and the inflation outlook. After deliberations, the monetary policy rate decision is finalized by a vote of the Committee on a one-person one-vote basis, with each member stating clearly and with reasons for the choice of a preferred decision. In instances where a decision of the Committee is not clear, the final decision is by consensus.
To provide certainty to the markets, MPC meeting dates are published on the Bank’s website at the start of each year.
In 2007, the Bank of Ghana officially adopted an Inflation Targeting (IT) framework underpinned by a flexible exchange rate regime. The framework is designed to ensure price stability over the medium term. To achieve this, the central bank has put in place institutional, accountability, and operational structures to support the implementation of the IT framework.
At the institutional level, the Government and the Central Bank jointly set the medium-term inflation target, and the Bank of Ghana is required to deploy its policy tools to attain the target. Currently, the Bank’s inflation target is 8% with a symmetric band of 2%).
At the operational level, inflation forecasts play an important role in determining the extent of likely deviation from the inflation target. The Bank has developed a suite of models for forecasting inflation. These models rely heavily on several indicators containing information about the future evolution of inflation. The Central Bank therefore implements a forward-looking operating procedure in which monetary policy instruments are adjusted (in line with the assessment of future inflation and the general macroeconomic situation) to attain the desired target.
The main policy tool employed by the MPC is the Monetary Policy Rate (MPR), which signals the stance of monetary policy and anchors short-term market interest rates to achieve the primary objective of price stability.
In exceptional times and under unusual circumstances, the MPC may announce additional macro-prudential policy measures in addition to its regular interest rate decision. These measures usually involve the utilization of other monetary policy tools at the disposal of the Central Bank, such as moral suasion and macro-prudential measures.
These instruments may be deployed to address perceived structural bottlenecks to current policies to avoid burdening the extent of use of the MPR which may have unintended consequences on the real economy.
By Edzorna Francis Mensah
