Dr. Ernest Addison
Dr. Ernest Addison

Ghana’s Monetary Policy rate set by the central bank as a guide for commercial banks in setting their lending rates will remain the same at 16 percent, Bank of Ghana announced here on Monday.

Briefing the media after the 87th regular meeting of the Monetary Policy Committee (MPC) governor of the central bank Ernest Addison said the decision was in spite of a slowing in the disinflation process since headline inflation remained within the medium term target band.

“The Committee was of the view that the monetary policy stance is relatively tight and real interest rates in Ghana are comparatively high. In the circumstances, the Monetary Policy Committee has decided to keep the policy rate unchanged at 16 percent,” the governor announced.

He added that while headline inflation remained within the medium-term target band, the latest forecast showed some upside risks in the outlook but not enough to dislodge inflation expectations.

The West African country had also been experiencing exchange rate pressures during the first quarter of this year with the local cedi currency depreciating around 8.0 percent over the period compared with the 0.02 percentage depreciation recorded over the same period last year.

Though the exchange rate pressures had moderated significantly, Addison said that the full pass through of the recent depreciation to inflation remained to be assessed.

Inflation which had slowed 0.4 percentage points to 9.0 percent in January, inched up again to 9.2 percent in February.

With the successful conclusion of Ghana’s Extended Credit Facility (ECF) backed International Monetary Fund (IMF) country program the committee underscored the need to remain steadfast in implementation of prudent policies to anchor the hard-earned stability in macroeconomic conditions.

“In this respect, the committee observed that there were risks to the outlook which would have to be monitored very closely. Overcoming these risks would require vigilance and time consistent policy actions,” the governor pointed out.

For example, he said, in the energy sector, large foreign exchange payments for excess capacity associated with the ‘Take or Pay’ Power Purchase Agreements which had contributed to higher demand for foreign exchange needed to be managed urgently.

“Also, the vulnerability associated with high non-resident holdings of domestic debt which poses significant risks to the fiscal consolidation process, debt dynamics, and the Bank of Ghana’s efforts at building reserve buffers, should be addressed,” he urged. Enditem

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