Editorial: Enhancing monetary policy effectiveness

Bank of Ghana (BoG) Governor Dr. Johnson Asiama, in his first formal remarks at the Monetary Policy Committee’s (MPC) 123rd meeting, signalled a shift toward greater transparency in the central bank’s monetary policy decision-making process.

He acknowledged public concerns regarding perceived opacity of the committee’s deliberations and outlined steps to improve communication and credibility. The Governor’s comments come at a time of heightened economic uncertainty with inflation still above 23 percent, well over the central bank’s medium-term target.

Persistent food inflation and a volatile external environment have increased speculation that the MPC may be forced to tighten policy further in the coming months.

Market analysts are increasingly betting on a rate hike at the MPC meetings’ conclusion, with some expecting an increase of up to 100 basis points (bps) when the decision is announced on Friday.

“Our task over the next few days is to weigh these developments rigorously and reach a policy stance that reinforces the disinflation path without undermining recovery or destabilising market expectations,” he remarked.

Dr. Asiama’s commitment to greater transparency is seen as a strategic effort to bolster confidence in the BoG’s policy framework. Analysts and business leaders have long called for clearer communication on monetary policy to help businesses and investors make informed decisions.

“We need to work on simplifying the way we present forecasts so the public and market participants can better understand the underlying policy story,” Dr. Asiama stated.

Indeed, the central bank has faced criticism in recent years for failing to provide detailed insights into its policy decisions, with voting patterns and internal debates largely undisclosed.

Greater transparency could enhance monetary policy effectiveness by reducing uncertainty in financial markets, according to analysts.

“The 2024 fiscal outturn was expansionary, with the deficit exceeding programme targets. We have seen encouraging signs of consolidation early in 2025, but questions remain as to whether current measures are adequate to anchor expectations and satisfy upcoming IMF programme reviews,” Dr. Asiama indicated.

Beyond fiscal concerns, the Governor highlighted liquidity pressures within the banking sector as commercial banks raise concerns about the cash reserve ratio (CRR) framework.

The balance between ensuring financial stability and maintaining an accommodative monetary stance remains delicate.

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