Ghana: Bank of Ghana holds the key rate stable in May
May 27, 2019
At its three-day meeting which concluded on 27 May, the Monetary Policy Committee (MPC) of the Bank of Ghana (BOG) kept its key policy rate unchanged at a five-year low of 16.00%. The decision was in line with the expectations of market analysts and marked the second consecutive hold following January’s unexpected cut.
Inflationary pressures have been intensifying gradually in recent months and seemingly drove the Bank’s decision to stay put in May. Inflation rose to a six-month high of 9.5% in April (March: +9.3%) as a marked jump in non-food inflation amid surging oil prices more than offset lower food inflation. In turn, inflation edged closer to the upper bound of the Central Bank’s medium-term target range of 8.0% plus or minus 2.0 percentage points.
Nevertheless, in its communiqué, the Bank noted that underlying inflationary pressures remained subdued in April, which, coupled with well-anchored inflation expectations, suggests that price pressures should retreat going forward. The Bank believes the recovery in the exchange rate, as pass-through effects stemming from an earlier slump in the cedi fade, will further support the disinflation trend.
Looking forward, a rate cut in the coming months remains on the table, provided inflation falls as expected, risks stay at bay and stability in the foreign exchange rate is sustained.
The next MPC meeting is scheduled for 17–19 July, with the decision set to be released on 22 July.
Author: Almanas Stanapedis, Economist