The Bank of Ghana kept its policy rate unchanged at 26 per cent, citing a slower pace of consumer price inflation, Dr Kofi Wampah, the Governor said on Monday.
The rate of inflation rose to 17.7 percent in December 2015, up marginally from 17.6 in November.
“This indicates some moderation in price movements over the previous month. The slower pace of inflation reflects the tight monetary policy stance and the ongoing fiscal consolidation,” Dr Wampah said at a press conference.
“In addition, our latest survey shows that inflation expectations have broadly moderated,” he added.
Dr Wampah said core inflation (CPI inflation excluding energy and utility prices), which reflects underlying inflation, had continued to rise, albeit at a slower pace.
He said going forward, the Committee expects the slower pace of price changes to continue and steer inflation down towards the medium target band of eight plus or minus two per cent.
However, there are upside risks to the inflation outlook which include uncertainties regarding the second round effects of the unanticipated petroleum price adjustments, exchange rate developments, as well as worsening external financing conditions.
“These risks would, however, be moderated by lower crude oil prices, and improvements in the energy situation,” Dr Wampah said.
On growth, Dr Wampah said in the medium term, growth conditions were expected to recover, supported by a sustained improvement in the energy situation, anticipated increased production of oil and gas and a general improvement in the macroeconomic environment.
However, he said, continuing tightness in the monetary and fiscal policy stance, weak consumer confidence, falling commodity prices and a slack in global growth posed risks to the growth outlook.
Dr Wampah said fiscal consolidation remained on track and that for the first eleven months of the year, the budget recorded a cash deficit of 5.6 per cent of GDP against a target of 6.8 per cent.
“Sustaining the fiscal consolidation efforts would complement the tight monetary policy stance for the attainment of the medium term inflation target. This would, in turn, help create conditions for long term sustainable growth,” he said.
Dr Wampah said the foreign exchange market had been relatively stable, supported by the tight monetary and fiscal policy stance, inflows from donors, the pre-export finance facility for cocoa and proceeds from the Eurobond issue.
In 2015, the Ghana cedi depreciated by 15.7 percent compared with 31.3 per cent recorded in 2014.
He said the maintenance of the tight policy stance, the smoothening of the supply of foreign exchange, and the enforcement of the repatriation of export proceeds into the banking system, in line with the Foreign Exchange Act, are expected to moderate the seasonal volatilities usually experienced in the first half of the year.
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