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The Bank of Ghana (BoG) has raised its main policy rate by 100 basis points to 25% to offset the risk of inflation. The increment is set to further hike bank lending rates and lead to increased decline in credit to the private sector. Inflation stood at 17.3% in August, down from 17.9% the previous month. Central Bank Governor, Dr Henry Kofi Wampah told the media that the bank tightened its rate in order to reach the full-year target of 13.7%. The BoG, which also cited expected significant increases in utility tariffs, announced an increment in the policy rate at its Monetary Policy Committee press briefing in Accra. Some experts, prior to the announcement, had indicated that they would be surprised if the regulator even maintained or increased the rate since, according to them, the macroeconomic environment remains weak. Shocked at the increase in the rate, they have condemned the BoG�s appetite for increasing the policy rate without recourse to its implications on the growth of the economy. According to Dr Eric Osei Assibey, Economist and lecturer at the Economics Department of the University of Ghana, Legon, �It is even more important that the policy rate is reduced at this time when government is embarking on very aggressive fiscal consolidation, which is virtually contracting the economy.� Interest rates, Dr Assibey maintained, must come down so that the private sector can borrow, expand businesses and grow the economy, adding that, �Otherwise, the targets that have been set for this year and 2017 for the economy�s growth cannot be realised.� The Ghana Statistical Service recently announced a reduction in inflation (17.3%), though marginal, it remains a reduction. The economist indicates that, �Inflation pressures are actually going down, and if the policy rate is an indicative rate that anchors peoples� expectations about inflation, then it stands to reason that the Central Bank will reduce the policy rate.� Experts are of the view that the bank should have taken a cue from its own report that revealed that credit to the private sector has declined, meaning that the sector is being crowded out, with dire implication for growth of the economy. Dr Joe Abbey of the Centre for Policy Analysis (CEPA) has warned of dire consequences if the Central Bank continues to tighten monetary policy without the corresponding fiscal interventions. The BoG attributed the hike in policy rate to the fact that �there are potential upward risks to the inflation forecast stemming from the planned increases in utility tariffs.� �The current forecasts suggest that attainment of the medium-term inflation target by the end of 2016 would require further tightening in the monetary policy stance else the target horizon will shift into 2017,� the Governor, Dr Henry Kofi Wampah, told journalists. The bank also attributed the policy rate hike to what it described as uncertainty in the foreign exchange market, which it said had heightened inflation expectations. �In the coming months, the currency volatility is expected to moderate due to the tight monetary policy stance and the anticipated inflows from the Eurobond issue and the syndicated pre-export finance facility for cocoa,� Dr Wampah assured.