The Bank of Ghana has maintained its Policy rate at 20% following its 80th Monetary Policy Committee Meeting.
Announcing this at press conference in Accra yesterday, Governor of the Central Bank, Dr. Ernest Addison pointed that although Ghana’s three major commodity exports recorded mixed developments during 2017, crude oil prices, however, gained the most on the back of geopolitical tensions, supply constraints and strong demand.
Again, the decision by OPEC and non-OPEC producers on increasing oil output cuts until the end of 2018 in a bid to clear the global crude oil glut and increased energy demand are among the factors driving up prices.
Gold prices also inched high than anticipated in 2017 because of moderate interest rates in advanced economies. Cocoa prices were generally depressed in 2017 due to excess supply across the West African sub-region.
Domestically, there was a decline in prices during 2017, with inflation dropping from 15.4 % in December 2016 to 11.8% in December 2017. This represents two marginal uptick of headline inflation recorded since the last MPC meeting in 2017.
The Bank of Ghana measure core inflation which includes energy and utility edged up from 12.3% in October to 12.6 percent in December 2017. This, however, the Bank weighted inflation expectations by businesses, consumers and the financial sector declined in December.
According to the Governor and Chairman of the Monetary Policy Committee, GDP growth momentum was maintained throughout 2017 with provisional GDP estimates from the Ghana Statistical Service (GSS) indicated that the economy grew by 9.3 percent in the third quarter, up from 9.0 and 6.6% in the second and first quarters respectively.
The non-oil GDP, which was slow in the first half of the year, picked up in the third quarter, recording a 5.9 percent.
Improved macroeconomic conditions, interest rates also generally followed a declined trend with interbank rates declining from to 19.3 percent as against 25.4 % in 2016. Credit to the private sector by banks grew steadily from 6.8 % in August 2017 to 12. 8% in December, on year-on-year basis, reflecting recovery from the slack in the first half year.
All these leading indicators monitored by the Bank of Ghana evidently show that the revised year projected GDP of 7.9 percent is attainable.
In view of all these major positive developments about the economy, the BoG decided to maintain the policy rate at 20 % with an inflation target of 8 +/-2.
Story by Malise Otoo