The Monetary Policy Committee (MPC), chaired by Dr. Johnson Asiama, has maintained the benchmark monetary policy rate at 14.0 percent, citing balanced risks to inflation and growth despite rising global uncertainties.
The decision comes against the backdrop of escalating geopolitical tensions in the Middle East, which the Committee said have weakened the global growth outlook, heightened inflation concerns, and increased policy uncertainty.
However, it noted that the direct spillover effects on the domestic economy—particularly through trade channels—have remained relatively muted.
The Committee observed that the domestic economy continues to recover strongly, supported by robust activity in the first quarter of the year.
Data from the Composite Index of Economic Activity (CIEA) pointed to sustained momentum, bolstered by expansion in private sector credit and improving economic conditions.
Growth is expected to remain resilient, although risks persist. The MPC cautioned that commodity price volatility and ongoing supply chain disruptions could pose downside risks to the growth outlook.
On inflation, the Committee noted that price pressures remain subdued, with inflation still below the lower bound of the medium-term target band.
While headline inflation and inflation expectations have ticked up marginally in recent months, core inflation has declined, suggesting that underlying inflationary pressures continue to ease.
The Committee projects that inflation will gradually trend upward into the target band, driven largely by exchange rate developments, food supply conditions, and increases in transport fares.
Despite the generally stable outlook, the MPC flagged several upside risks to inflation. Chief among them is the possibility of a prolonged Middle East crisis, which could push crude oil prices beyond US$100 per barrel, leading to higher domestic fuel and transport costs.
Additionally, the quarterly adjustment of utility tariffs is expected to exert upward pressure on non-food inflation in the coming months.
The Committee expressed confidence that existing policy buffers would help contain emerging risks. It highlighted relative exchange rate stability, improved foreign reserve buffers, and continued fiscal discipline as key factors that could moderate inflationary pressures.
In addition to holding the policy rate, the Committee announced an adjustment to the Dynamic Cash Reserve Ratio (CRR). The ratio has been set at a uniform 20 percent to be maintained in domestic currency, effective June 4, 2026.
The move is expected to strengthen liquidity management within the banking sector while supporting overall monetary policy effectiveness.
Looking ahead, the MPC reaffirmed its commitment to closely monitor incoming economic data, particularly any spillover effects from global geopolitical developments.
The Committee indicated its readiness to take further policy actions if necessary to safeguard macroeconomic stability.
The latest policy stance underscores a cautious but steady approach, as authorities seek to balance economic recovery with emerging inflation risks in an increasingly uncertain global environment.
By: Christian Akorlie / businesspostonline
