The Bank of Ghana has cut its policy rate by 200 basis points to 18 percent, citing a positive outlook to inflation and the significant moderation in price pressures.
Dr Ernest Addison, Governor of the Bank of Ghana, told a press conference after a meeting of the Monetary Policy Committee that the disinflation process continued to firm up over the first two months of the year, with significant moderation in price pressures.
“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,” he said.
Dr Addison said the Bank of Ghana’s latest forecast suggested that the medium-term inflation target of 8±2 percent was within the forecast horizon and the Bank was on course to meeting the inflation target band.
He said 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.
He said growth prospects for 2018 remain positive and are expected to be supported by crude oil production, gradual recovery in the non oil sector, and favourable business and consumer sentiments.
The pace of growth in economic activity as reflected by the latest update in the CIEA showed some improvements, although still below potential for a number of reasons, including moderated credit growth due to high Non Performing Loans, tighter credit conditions and corrections in the balance sheets of the banking sector.
On the foreign exchange front, the Governor said the market had remained calm over the first quarter of 2018 on the back of subdued demand pressures alongside improved foreign exchange liquidity.
Cumulatively, the local currency has appreciated by 0.2 percent against the US dollar, in the year to March 23, 2018, compared with a depreciation of 5.0 percent during the same period in 2017.