Accra, November 27, 2017//-The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has reduced its policy rate from 21% to 20%, citing disinflation pressures, sound macroeconomic environment, among others.
The Chairman of the MPC and Governor of BoG, Dr Ernest Addison made the announcement at a press briefing in Accra today.
He noted that since the beginning of 2016, inflation has been trending on downwards.
The policy rate is the rate at which the central bank lends to the commercial banks in the country.
With the reduction, all the commercial banks are expected to reduce their interest rates in the country.
Dr Addison explained that; ” the indicators of economic activity and business and consumer confidence remain strong. Inflation expectations remain subdued, with core inflation measures in line to achieving the medium term inflation objective. And, the cedi has remained relatively stable on the foreign exchange market, despite recent movements which are not a reflection of the underlying fundamentals”.
The balance payments position remains robust with a projected trade surplus and reduced current account deficit in 2017 and on track to build up over US$700 million additional reserves this year alone, to bring total gross international reserves to US$7.4 billion”.
The initial fragilities in the banking sector have largely been contained and efforts are being made to strengthen the sector, including enhancing supervision and increasing the minimum capital requirements to ensure stronger and well-capitalized banks that can support the government’s transformational agenda, according to him.
“Looking forward, the prospects are for strengthening the current macroeconomic performance by consolidating gains made so far in fiscal adjustment and prudent monetary management, underscoring the policy commitment to macro-stability”.
The Committee observed a return to the disinflation path with the Bank’s latest forecast indicating that the horizon for the attainment of the medium term inflation target of 8±2 percent in 2018 remains unchanged.
This forecast is however contingent on continued improvement in the global economic environment including oil price changes, stability in the foreign exchange market and achieving the medium-term fiscal targets.
There are indications that the oil-induced growth is gaining momentum, while the slower non-oil growth remains a concern and may require additional impetus to boost overall growth towards its full potential.
However, recent developments such as the implementation of growth-enhancing government policy initiatives, positive sentiments from businesses and consumers as well as improvement in electricity supply are supportive of non-oil growth.
These notwithstanding, slower private sector credit expansion and tightening credit stance on enterprises could dampen the growth momentum.
African Eye Report
