The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has kept its policy rate of 21 percent unchanged.
According to the Central Bank Governor, Dr. Ernest Yedu Addison, the decision was influenced by threats to economic growth and stability.
Addressing a press conference yesterday, Dr. Addison said improved global growth prospects and accommodative monetary policy stance in advanced economies have impacted favourably on Ghana’s external position.
He added that, 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.
The Monetary Policy rate often influences the cost of credit in the country. This is the second time the Central Bank has maintained rate for this year.
Dr. Addison added “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.
“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.
“The Committee 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.”