The Monetary Policy Committee of the Bank of Ghana, as part of efforts to address the surging inflation, has raised its Policy Rate by 50 basis points, reaching 30%.

This is the latest move in a series of increases since November 2021, amounting to a total of 15.5%.

Interestingly, despite the hike in the policy rate, lending rates are not anticipated to rise. Surprisingly, the cost of credit has been decreasing, contrary to the expected upward trend.

After declining consistently between January to April, headline inflation increased in May and June on account of a variety of factors, including higher food prices, implementation of new tax measures, and utility tariff adjustments.

Overall inflation increased from 41.2 percent in April to 42.2 percent in May and then further to 42.5 percent in June.

Underlying measures of inflation have all ticked up in May 2023, the BoG said.

"While core inflation ticked up, businesses expectations of inflation remain flat at an elevated level. Although inflation is expected to decline in the near-term, baselineforecasts show a slightly higher elevated profile in the year ahead, which, if not contained, could embed in underlying inflationary pressures.

"It is important that policy responds appropriately and decisively to prevent these risks from becoming embedded and consequently derail the disinflation process," the Central Bank addded.

Inflation has persistently hovered around 42 percent throughout the second quarter of 2023 even though central bank financing has been eliminated in the first six months of the year.

Ghana’s macroeconomic framework, the Central Bank noted, requires decisive tightening from both the fiscal and monetary side to anchor inflation expectations firmly on a declining path.