Recent reduction of the monetary policy rate by 1 percent [from 30% to 29%] by the Bank of Ghana (BoG) has been criticised by Togbe Afede XIV, the Agbogbomefia of Asogli State, who described it as a joke.

The Central Bank's Monetary Policy Committee made this decision during its first meeting of the year on January 29, 2024, following a review of economic developments in the country.

According to Dr. Ernest Addison, the Governor of the Bank of Ghana, the decision was influenced by a decline in core inflation figures and various factors supporting the disinflation process.

However, Togbe Afede XIV strongly opposes the Central Bank's decision, questioning the actual impact of the 1 percent rate reduction on lending rates, inflation, exchange rates, or overall economic growth.

In a write-up sighted by GhanaWeb Business, the economist wrote, “I wonder whether they have determined the correlation between interest rates, inflation, and exchange rates in our country.”

“The hesitant 1% rate cut to 29% is particularly surprising given their expectation that headline inflation would “ease to 15%±2% by the end of 2024 and gradually trend back to within the medium-term target range of 8%±2% by 2025.”

I do not see the relationship between the expected or target 15%±2% inflation and the high 29% monetary policy rate. It gives the impression that our top economists do not believe in themselves or their own forecasts,” he explained.

Togbe Afede XIV also voiced concerns regarding the credibility of Central Bank officials and economic managers, suggesting that their recent assertion of "emerging recovery" contradicts previous statements indicating the economy had "turned the corner."

While acknowledging the complexity of interactions among macroeconomic variables, Togbe Afede XIV emphasised that the Central Bank's policy rate and open market operations should ideally influence the inflation rate.

“But BOG officials still have a fixation on headline or year-on-year inflation, and so they cannot depart from their reactionary monetary policy approach, which responds to what has transpired, that is, past one-year price changes, instead of their expectation of inflation (15%±2% this year).

So, the 1% reduction in the policy rate appears to be a reaction to the 3.2% fall in headline inflation in December to 23.2%, from 26.4% % in November,” Togbe Afede XIV emphasised.

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