We are concerned about inflation outlook when setting policy rate – BoG Governor

Dr Johnson Asiama, the Governor of the Bank of Ghana (BoG), disclosed that the Monetary Policy Committee (MPC) places significant emphasis on inflation when determining the policy rate. He explained that the committee's decisions are influenced by their assessment of the anticipated inflation trajectory and the potential risks that could impact this outlook.

"This is why our decisions are always guided by the inflation outlook," Dr Asiama stated. The Governor emphasized this principle during the inaugural MPC Educational Observership Programme, aimed at introducing Economics and Business students from tertiary institutions to the central bank's monetary policy process. The inaugural edition of the programme welcomed students from the University of Ghana's Department of Economics and Business School.

In this programme, participants engage with the Governor, reflect on MPC meetings, and gain insights into how various factors like inflation expectations, emerging risks, and differing views within the committee shape monetary policy decisions. Dr Asiama elaborated that recent Middle Eastern developments prompted the MPC to maintain the policy rate, despite his initial inclination towards an easing cycle.

He clarified that, unlike previous instances, the committee now employs a majority decision-making process rather than a consensus approach. Dr Asiama explained that adopting a consensus could stifle individual expressions of views. "If you go for a consensus, more or less you are constraining everyone to fall in line," he added.

He further underscored the importance of maintaining the independence of MPC members, who are expected to voice their positions without being swayed by the Governor's stance. Inflation expectations are a key consideration in determining the policy rate. Dr Asiama highlighted that his team conducts research to inform these decisions.

"We also have a team that goes out to do the necessary research, and all these things guide our policy rate decisions," he concluded.