As the Monetary Policy Committee (MPC) of the Bank of Ghana commences its 68th Regular Meeting today, the International Monetary Fund (IMF) is urging that the policy rate -- which remains at an 11-year-high - be further increased as inflation continues to drift from the set target.

The MPC at its last meeting in November voted to increase the policy rate by 100 basis points, chiefly in anticipation of the pass-through effects that hikes in utility prices would have on inflation’s momentum.

Dr. Kofi Wampah, Governor of the central bank, told the press after the last MPC meeting: “The current level of inflation and the latest inflation expectations remain far above the medium-term target band of 8±2 percent. Also, there are imminent upside risks to the inflation outlook: such as worsening external financial conditions and the planned utility tariff adjustments, which are now likely to be higher than anticipated during the last MPC meeting”.

But that decision did not prevent December inflation from inching up marginally to 17.7 percent from 17.6 percent in November, 2015. Aside from the increases in utility prices, there have been major increases in fuel prices as well…posing a further risk to inflation.

The Washington-based lender in its second review of the country’s ongoing Extended Credit Facility programme argued: “To help bring inflation down toward its medium-term target, the Bank of Ghana (BoG) should stand ready to further tighten monetary policy if inflationary pressures do not recede as expected”.

As anticipated by the central bank, utility prices have gone up by more than 63 percent on average, with prices of petroleum products also shooting up by an average of 33 percent at the pumps -- feeding into the inflationary pressures.

Given the pass-through effects these increases have on inflation, the MPC is expected use its inflation-targetting tools once more in trying to taming inflation, which climbed to 17.7 percent in December.

The central bank is determined to achieve its medium-term inflation target of 8 percent as it indicated in its last meeting when it raised the policy rate to 26 percent despite inflation remaining stable, and analysts are predicting a further squeeze on the policy stance.

The policy rate serves as the indicative rate at which the central bank lends to commercial banks, and this in turn acts as a benchmark by which the banks also lend to the public.

The tightening of monetary policy has not gone without adverse effects on the economy, with the IMF itself conceding that credit to the private sector has declined sharply.

As the MPC begins its meeting today, it will also take into consideration the pressure the local currency has always come under at the turn of every new-year, although the cedi has remained relatively stable in the past few days of 2016.

During the first-half of 2015 the cedi lost more than 23 percent of its value against the US dollar, and the central bank will be guided by this fact; increasing the policy rate will be an option that will hopefully entice investors to hold onto cedi assets rather than the greenback.