Ghana: Bank of Ghana keeps policy rate unchanged in July
July 18, 2016
At its 18 July 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. The decision met market expectations and came amid an easing of inflation in June.
The Bank commented that high inflation figures from H1 2016 were largely the result of high fuel, utility and food prices. The Bank further noted that the price increase of these items stemmed from higher production prices, as it stated that inflation was driven by a “cost-push” effect. The high inflation has also resulted in a slight increase of inflation expectations in June. However, the Bank stated that tight monetary and fiscal policies will slow inflation this year.
Regarding the real economy, the Bank stated that the impact of Brexit will likely be felt through Ghana’s external sector. Trade, foreign investment and budgetary support for the Ghanaian Government could all deteriorate as a result of the uncertainty surrounding Brexit, and Ghana’s close ties to the EU and the UK. Against this backdrop, the BOG decided that “risks to inflation and growth as balanced and decided to maintain the policy rate at 26 percent”. The next policy meeting is scheduled for 16 September 2016.
Author: Dirina Mançellari, Senior Economist