Bank of Ghana
Bank of Ghana

The Monetary Policy Committee of Ghana’s central bank said here on Monday that it will maintain its benchmark policy rate at 20 percent.

Ernest Addison, governor of the Bank of Ghana, said the decision was to ensure that inflation expectation is anchored and the medium-term inflation target of 8 percent plus or minus 2 is achieved by the end of this year.

While there was a trend decline in headline and core inflation throughout the year, allowing for 550 basis points of policy rate cut, the committee had observed some emerging pressures in underlying inflation in the last two months of 2017, although inflation expectations appear to be well anchored, the governor said.

Addison expressed optimism the gross domestic product (GDP) growth target of 7.9 percent for 2017 can be achieved.

Domestically, he said, economic activity has been fairly robust and the momentum is expected to be sustained over the medium term, supported by continued favorable external financing conditions, while fiscal consolidation is on track and expected to deliver better-than-programmed budget deficit in 2017 as expenditures were properly aligned to address shortfalls in revenues.

“Furthermore economic activity has picked up significantly while private sector credit growth is recovering. The non-oil sector of the economy is also rebounding after the sluggish performance in the first half of last year, supported by continued improvements in economic fundamentals and improved investor confidence, expecting the trends to continue in 2018,” Addison added.

The economy grew 6.6 percent, 9.0 percent and 9.3 percent in the first, second and third quarters of the 2017 respectively, heightening the optimism that the 7.9 percent GDP growth target is easily within reach.

In November, the central bank slashed the benchmark policy rate by 100 basis points to 20 percent, after a cumulative 450 basis-point rate cuts during the same year.

Inflation rate, which had fallen to 11.6 percent in October 2017 from 13.3 percent in January, inched up again to 11.8 percent in December.

John Gatsi, a professor at the economics department of the University of Cape Coast in Ghana, said that one could not begrudge the central bank for maintaining the policy rate at its current levels, since some of the previous reductions did not make economic sense.

The current decision would stabilize the effects of the previous reductions, Gatsi said.

“Under current circumstances there are only two options; either they reduce it marginally or maintain it ,” the economist said. Enditem



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