Accra, March 26, 2018//-The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has reduced its policy rate from 20% to 18%, citing downward inflation pressures, uptick of global economy, and strong path of fiscal consolidation.
The Chairman of the MPC and Governor of BoG, Dr Ernest Addison made the announcement at a press briefing in Accra today.
He said: ” The disinflation process continued to firm up over the first two months of the year, with significant moderation in price pressures. Both headline and core inflation broadly trended down, alongside easing inflation expectations, an indication that the disinflation process remains well-anchored.
Our latest forecast suggests that the medium-term inflation target of 8±2 percent is within the forecast horizon and we are on course to meeting the inflation target band”.
Dr Addison added that the committee noted that the current inflation forecast provides scope for monetary policy to realign interest rates, translate the disinflation gains achieved so far to the market, and reinforce the fiscal consolidation process by easing the burden of interest payments on the budget. Under these circumstances, the committee decided to reduce the monetary policy rate by 200 basis points to 18.0 percent.
The strong path of fiscal consolidation in 2017 continued in the first quarter of 2018, with the continuation of the allotment system which aligned expenditures to revenues. Growth prospects for 2018 remain positive and are expected to be supported by crude oil production, gradual recovery in the nonoil sector, and favourable business and consumer sentiments, according to him.
The pace of growth in economic activity as reflected by the latest update in the Bank of Ghana Composite Index of Economic Activity (CIEA) showed some improvements, although still below potential for a number of reasons, including moderated credit growth due to high NPLs, tighter credit conditions and corrections in the balance sheets of the banking sector.
The policy rate is the rate at which the central bank lends to the commercial banks in the country. With the reduction of the rate, all the commercial banks are expected to reduce their interest rates in the country.
African Eye Report
