In a decisive move to strengthen liquidity management and reinforce monetary policy effectiveness, the Bank of Ghana (BoG) has introduced three new liquidity measures alongside a surprise hike in the policy rate by 100 basis points, raising it from 27% to 28%.
Governor Dr. Johnson Asiama announced the measures during the 123rd Monetary Policy Committee (MPC) press briefing on March 28, 2025.
The new initiatives include;
Introduction of a 273-day instrument to enhance the central bank’s sterilization toolkit, providing additional options for liquidity absorption.
Stricter monitoring of banks’ Net Open Positions (NOPs) to ensure compliance with regulatory limits and prevent excessive currency exposure.
Review of the Cash Reserve Ratio (CRR) structure to assess its broader impact on liquidity conditions and financial intermediation.
Rationale Behind the Policy Rate Hike
The unexpected policy rate increase signals the BoG’s commitment to controlling inflation and stabilizing the economy. The MPC emphasized that the hike aims to sustain the ongoing disinflation process, with a long-term objective of achieving price stability.
“The decision reflects our commitment to anchoring inflation expectations while ensuring financial stability. As inflation moderates, we will reassess the policy stance for possible easing,” the MPC stated.
The latest policy shift underscores the BoG’s proactive approach to macroeconomic stability amid evolving domestic and global economic conditions. Analysts suggest that while the policy rate hike may increase borrowing costs for businesses and consumers, the liquidity measures are expected to support financial market efficiency and long-term economic resilience.
Source: Joseph Yoyowah || TheHighStreetJournal
March 29, 2025