The Bank of Ghana (BoG) has raised the policy rate by 300 basis points (bp) to 22 per cent in a historic move meant to ease growing inflationary pressure and contain the heightened fall in the value of the cedi.
The central bank has also raised the primary reserve requirement of banks from 12 per cent to 15 per cent to help mop up liquidity and dowse the price pressures.
The two policy decisions are part of a raft of measures that BoG took after an emergency Monetary Policy Committee meeting on Wednesday (August 17, 2022).
The seven-member committee also announced plans by the Bank to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining, and oil and gas companies to help shore up forex liquidity.
BoG is betting on the measures to help arrest the cedi depreciation which has heightened in the face of growing micro fiscal challenges.
Beyond helping to slowdown inflation and the cedi depreciation, the increment in the policy rate and the reserve requirement of banks is expected to feed into interest rates, leading to higher lending costs for households and businesses.