The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) after its 66th regular MPC meetings has decided to increase the monetary policy rate from 24 to 25 percent.
The decision to increase the policy rate is consistent with the bank’s forecasts, which requires further tightening in order to bring inflation back within the target band by the end of 2016.
The Committee explained that it will continue to monitor developments and take appropriate action if necessary.
Briefing the press in Accra yesterday, the Governor of BoG, Dr. Henry Kofi Wampah explained that since the beginning of the year, inflation pressures have persisted due to uncertainties in the foreign exchange market, with implications from petroleum pricing and other traded goods and services.
Dr. Wampah added that 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.
He said “There are potential upward risks to the inflation forecast stemming from the planned significant increases in utility tariffs. Consistent with the attainment of the inflation target by the end of 2016 therefore, the MPC is determined to prevent first round effects of the likely increases in prices and the higher cedi liquidity during the fourth quarter from being entrenched into elevated inflation expectations.”
According to the Governor, the committee observed that the fiscal consolidation continued in the first seven months of the year, as revenues exceeded target while expenditures remained within targets.
He said these developments resulted in fiscal deficit of 3 percent of GDP, within the program target of 4 percent.
He said “maintaining the pace of fiscal consolidation over the medium term is necessary to complement the tight monetary policy stance for the attainment of the medium term inflation target.”
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