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MPC Likely To Keep Policy Rate At 20%   
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The Monetary Policy Committee (MPC) of the central bank is set to review the Monetary Policy Rate (MPR) on Monday January 22, 2018 with the prime objective of ensuring price stability and low inflation to curtail the depreciation of the cedi and support output and employment growth.

This will be the 80th regular meeting of the MPC since the Bank of Ghana’s introduction of the policy rate as a central policy tool for its inflation targeting regime in 2002. At the last meeting, the committee reduced the MPR by 100 basis point to 20%.

In 2017, the MPR fell from 25.5% at the beginning of the year to 20%, representing 550 basis point reduction. This was possible because of downward trend of inflation and high economic growth prospects. Inflation declined by 3.6 percentage points, from 15.4% in December 2016 to 11.80% in December 2017.

This was accompanied by decline in Treasury bill rates commercial banks’ lending rate, and increase in investor confidence. The average base rate for the banking industry fell from 27.6 in January 2017 to 25.7% in December 2017. Monetary policy in 2017 largely supported government fiscal policy to expand growth.

Many things have happened since the last meeting in November 2017 which are expected to influence the decision of the MPC. One of such factors is the performance of the cedi. The GCFM Cedi index, a measure of the holistic performance of the Cedi on the inter-bank market increased from 407.7 as at November 28th 2017 to 413.79 as at 16th January 2018, representing a change of 1.7%. As at Monday 15th January 2018, the cedi recorded a year to date depreciation of 0.11%, 1.95% and 1.88% against the dollar, the pound and the euro compared to 0.65%, -1.82% and 1.03% over the same period in 2017.

Inflation also increased marginally in December 2017 to 11.80% from 11.70% from November 2017. However, inflationary expectation are set to increase due to increase in oil prices which is expected to reflect on ex-pump prices. Growth prospect remains very high. This is partly because of improvement in some key macroeconomic variances and government quest to consolidate these gains.

Aside the performance of the cedi, inflation and growth outlook, the MPC is expected not to make any decisions based on figures that are likely to be affected significantly by seasonality. Therefore Groupe Nduom (GN) Research analysts expect the MPC to view the growth prospects and the possible risk to inflation as balance and maintain the MPR at 20%.
Source: Today

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