Bank Of Ghana Maintains Policy Rate At 26%

Who: Bank of Ghana, Dr. Abdul Nashiru Issahaku-Governor of Bank of Ghana.

What, Why & When: Ghana's central bank has a mandate to pursue "price stability and create an enabling environment for sustainable economic growth in the economy" 1.

Against this backdrop, the Bank of Ghana (BoG) has for the 5th time this year maintained the monetary policy rate at 26%, according to statement following the 19th September Monetary Policy Committee (MPC) meeting 2: The policy rate has been left unchanged since November 2015.

In justifying its decision, the bank explained that the rise in inflation from 16.7% in July to 16.9% in August, was only marginal. Moreover, the MPC envisages continued tightness in monetary and fiscal policy, and relative stability in the foreign exchange market.

N.B: The cedi has enjoyed some stability this year – depreciating by only 4.1% as at mid-September as compared to 15% recorded for the same period last year.

Outlook: All other things being equal, demand-pull dynamics from the approaching festive season will drag Ghana further still from its medium term goal of single digit inflation 3.

Having said that, three factors militate against a significant uptick in consumer prices: a) fiscal restraint, if it is maintained, and IMF "pressure" makes this more likely, b) an inhospitable private sector credit environment, c) burgeoning foreign exchange stability. On the latter point, progressively higher production from the Jubilee...

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