The prime rate, which is of keen interest to businesses, signals the rate at which the Central Bank will lend to commercial banks.

It also subsequently influences average lending rates on loans to individuals and businesses.

In his address to the media, Governor of the Bank of Ghana, Dr. Ernest Addison, noted that the increase forms part of efforts to address current inflationary pressures.

“The inflation forecast shows that in the outlook, inflation will likely peak in the first quarter of 2023 and settle at around 25 percent by the end of 2023. This forecast is conditioned on the continued maintenance of tight monetary policy stance and the deployment of tools to contain excess liquidity in the economy. There are however some risks to this forecast that would have to be monitored, including additional pressures from the proposed VAT increase, and exchange rate pressures.”

“Continued vigilance to the evolution of these potential price pressures in the outlook will be key. The Committee is of the view that significant upside risks to the inflation outlook remain. To continue to anchor inflation expectations, the Committee therefore decided to increase the policy rate by 250 basis points to 27.0 percent,” he said.

Following the increase in the policy rate, his means cost of borrowing is expected to go up further.