Accra, September 25, 2017//-The Monetary Policy Committee (MPC) of Bank of Ghana (BoG) has maintained its policy rate at 21 percent.
The decision to maintain at the rate was based on disinflation pressures as well as increase in fuel prices in August 2017.
Announcing the decision in Accra today, the Governor and Chairman of the MPC, Dr Ernest Addison said the disinflation process would continue to the third quarter of the year.
The policy rate is the rate at which the central bank does overnight lending to the commercial banks in the country.
With the reduction, all the commercial banks are required to reduce their base rates accordingly.
In taking the decision, the MPC observed that improved global growth prospects and accommodative monetary policy stance in advanced economies have impacted favourably on Ghana’s external position.
“However, the recent signals of monetary policy normalisation could result in tight global financing conditions which may pose some balance of payments pressures in the outlook”.
On the domestic front, growth prospects remain positive, although below potential. This implies that the output gap may narrow but at a much slower pace. Economic activity continues to improve supported by higher oil production volumes, positive sentiments from businesses and consumers, improvement in electricity supply, uptick in private sector credit and a number of government policy initiatives to boost agriculture and manufacturing activities. All these point to positive growth prospects in the medium term”.
Dr Addison who is also the Chairman of the MPC noted that the fiscal consolidation process is broadly on course. Although expenditures remained within targets, the pace of spending picked up in June and July.
“The continued revenue underperformance could however pose some challenges to the fiscal outlook. Headline and core inflation picked up in August, although inflation expectations declined”.
He noted that the uptick in core inflation, an indication of emerging pressures, would require further monitoring. Since August 2017, there have been upward adjustments in ex-pump petroleum prices which are likely to transmit through prices in the coming months and pose some risks to the inflation outlook.
“These notwithstanding, the latest forecast show that medium term inflation target is achievable in 2018. This forecast is contingent on continued fiscal consolidation and exchange rate stability”.
The monetary policy stance has eased in line with declining inflation and underlying inflation pressures since the beginning of the year. At this MPC round however, the Committee decided it was time to pause the easing cycle in view of emerging risks to the inflation outlook, while remaining vigilant and committed to respond and take the necessary policy actions should these initial signs of underlying pressures persist.
Consequently, the Committee decided to maintain the monetary policy rate at 21 percent
African Eye Report
