Bank of Ghana Upholds Key Policy Rate at 16% for 2 Consecutive Times

Governor of Bank of Ghana, Dr. Ernest Addison

Accra, Ghana, May 27, 2019//-The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) today maintained its policy rate at 16 percent for two consecutive times.

Announcing the decision of the committee, the Governor of BoG and Chairman of the MPC, Dr Ernest Addison explained to journalists in Accra that the recent exchange rate pass-through has slowed the disinflation process.

This he noted resulted in a slightly elevated inflation profile as shown in the latest forecasts. However, core inflation remains subdued and inflation expectations fairly anchored, according to him.

The policy rate is the rate at which the central bank does overnight lending to commercial banks in the country. With the keeping of the policy rate, all the commercial banks are expected to maintain their base rates.

Dr Addison noted: “Headline inflation has continued to inch up gradually in the three months to April, reflecting pass-through effects from the recent currency depreciation.

Since February 2019, headline inflation increased from 9.2 percent to 9.3 percent in March and further to 9.5 percent in April. These increases in inflation appear not to have become embedded in underlying inflation as the Bank’s main measure of core inflation (inflation excluding fuel and utilities prices) eased in April 2019; and, inflation expectations remain well-anchored”.

He added that ; “growth remains relatively strong as the output gap continues to close. The Bank’s updated Composite Index of Economic Activity (CIEA) also shows evidence of increased economic activity with a yearly growth of 4.0 percent in March 2019, up from 2.9 percent a year earlier”.

This robust pace of economic activity is supported by improved sentiments from businesses following the Ghana Cedi’s recovery from the recent sharp depreciation and favourable growth prospects, even though consumer sentiments weakened slightly as a result of recent increases in prices”.

The domestic currency market has calmed down since the recent bout of volatility in the first quarter, while other emerging market economies currently appear to be facing some volatility on the global currency market. This is due to the supportive fundamentals as well as improved supply in foreign exchange following the recent Eurobond issue, the MPC report said.

In the year to May 23, 2019, the Ghana Cedi cumulatively depreciated by 5.8 percent, compared with 0.2 percent for the corresponding period of 2018.

However, against the other major currencies, the depreciation was more moderate. Against the British pound and Euro, the Ghana cedi cumulatively depreciated by 4.7 percent and 3.3 percent respectively, compared with 1.4 percent and 2.6 percent appreciation respectively over the same corresponding periods.

African Eye Report

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