BoG Maintains Monetary Policy Rate At 21 Percent

The Bank of Ghana (BoG) has maintained the monetary policy rate at 21 per cent.

Dr Henry Kofi Wampah, Governor of Bank of Ghana, in assessing the inflation outlook; noted that inflation, which peaked in the last quarter of 2014, had begun to decline in January, 2015, on the back of tight monetary policy stance, base effects and improved inflation expectations.

He said of concern to BoG was the rise in food inflation ahead of the lean season as well as the rising core inflation.

He however, said, the latest forecasts show that the disinflation was likely to continue through 2015, heading towards the target band of 8.0 ±2 per cent later in 2016.

Dr Wampah made these remarks in Accra at the BoG Monetary Policy Committee press briefing on macroeconomic situation in Ghana against the background of developments in the global economy.

He said the upside risks to the inflation forecasts include the effects of the prolonged energy crisis through increased input costs, higher inflation expectations as well as emerging pressures in the foreign exchange market.

Dr Wampah said: “On the downside however, the pass-through effects of the falling crude oil price, declining inflation expectations, the on-going fiscal consolidation, and a possible program with the International Monetary Fund are expected to exert some downward pressure on inflation and drive inflation further down towards the target bands.

“In assessing risks to the outlook, the Monetary Policy Committee observed the continued vulnerability in the global environment and volatilities in the financial markets which have resulted in declining commodity prices.”

He pointed out that in particular, the declining trends in crude oil prices continue to worsen the risks facing most oil exporting economies.

He said although the declining trend in oil prices could have a favourable effect on the balance of payments, the loss in oil related revenues would impact negatively on the national budget.

He said the Monetary Policy Committee observed that there was a pickup in the Composite Index Economic Activity (CIEA) during the last quarter of 2014, boosted by a number of factors including DMBs credit to the private sector, Social Security and National Insurance Trust (SSNIT) contributions and port activity.

According to the Governor, this was supported by improved sentiments and optimism by businesses and consumers as well as easing credit conditions to both enterprises and households.

“However, the risks to the growth outlook remained tilted to the downside due to the challenges in the energy sector, expected fiscal consolidation, a tight monetary policy stance, and the adverse effects of lower international commodity prices; particularly crude oil prices.

“These are expected to be offset by a pick-up in consumer and business sentiments, strong growth in real credit to the private sector, addition of the Atuabo Gas processing plant, and the IMF deal which will underpin investor confidence,” he stated.