The Central Bank has for the second time this year maintained its policy rate at 21 percent.
The announcement, which came after the bank’s recent monetary policy committee meeting in Accra, is aimed at checking the marginal increases in the prices of goods and services and also the depreciation of the cedi.
Dr Ernest Addison, Governor of the Bank of Ghana (BoG), at a press conference yesterday in Accra, said “this time round however, the committee decided it was time to pause the easing cycle in view of emerging risks to the inflation outlook, while remaining vigilant and committed to responding and taking the necessary policy actions, should these initial signs of underlying pressures persist.”
He added that the monetary policy stance had eased in line with declining inflation and underlying inflation pressures since the beginning of the year.”
In January, this year, the policy rate stood at 25.5 percent.
Inflation
Commenting on headline and core inflation, which he said picked up in August this year, Dr Addison said the committee noted that the uptick in core inflation, an indication of emerging pressures, would require further monitoring, hence the decision to maintain the rate at 21 percent.
Fears
“Since August 2017, there have been upward adjustments in ex-pump petroleum prices which are likely to transmit through prices in the coming months and pose some risks to the inflation outlook.
“These notwithstanding, the latest forecast show that medium term inflation target is achievable in 2018. This forecast is contingent on continued fiscal consolidation and exchange rate stability.”
Growth prospects
On the domestic front, he said growth prospects remained positive, although below potential.
“This implies that the output gap may narrow but at a much slower pace. Economic activity continues to improve, supported by higher oil production volumes, positive sentiments from businesses and consumers, improvement in electricity supply, uptick in private sector credit and a number of government policy initiatives to boost agriculture and manufacturing activities. All these point to positive growth prospects in the medium term.
Fiscal situation
“The fiscal consolidation process is broadly on course. Although expenditures remained within targets, the pace of spending picked up in June and July. The continued revenue underperformance could however pose some challenges to the fiscal outlook. In taking the decision, the Committee observed that improved global growth prospects and accommodative monetary policy stance in advanced economies have impacted favourably on Ghana’s external position.
Warning
“However, the recent signals of monetary policy normalization could result in tight global financing conditions which may pose some balance of payments pressures in the outlook.”
<<Print>>