Ghana: Bank of Ghana keeps policy rate on hold in May
May 16, 2016
At its 13 May monetary policy meeting, the Bank of Ghana (BOG) decided to keep its monetary policy rate unchanged at 26.00%, thus leaving the rate at its highest level on record, where it has been since November 2015. The decision met market expectations and came amid a backdrop of still-high inflation, despite signs of easing inflationary pressures.
Regarding price development, the Monetary Policy Committee (MPC) noted that inflation and core inflation both spiked in March, but receded slightly in April. In the Bank’s assessment, inflation expectations decreased recently mainly due to a broadly stable exchange rate and increased energy supply. The BOG projects inflation to ease during the remainder of the year, thanks to stability in the cedi and tight monetary policy. Nevertheless, the Bank highlighted several upside risks to the inflation outlook, including rising utility tariffs and prices for petroleum products along with increasing food prices. On the domestic economy, the Bank commented that recent indicators pointed to an uptick in economic activity and robust sentiment in the first quarter of this year. Particularly, the Bank noted that consumer and business sentiment were supported by a fairly stable exchange rate and increased electricity supply. Overall, the BOG sees that Ghana’s growth prospects are encouraging and that GDP will be boosted by an improved energy supply, a stable currency and increased oil and gas production. That said, the Central Bank noted that fiscal adjustments and tight financing conditions could represent a downside risk for growth. The next monetary policy meeting is scheduled for 15 July.