The Bank of Ghana’s Monetary Policy Committee (MPC) on Monday maintained the policy rate at 21 per cent owing to emerging risks to inflation seen in increases in core inflation figures.
Dr Ernest Addison, Bank of Ghana (BoG) Governor, who made the announcement to the media following the committee’s 78th regular meeting, said the decision to pause ‘the easing cycle’ of the monetary policy stance was due to the emerging risks to inflation outlook.
The monetary policy stance had eased since the beginning of the year in line with declining inflation and underlying inflation pressures, having been recently reduced from 22.5 per cent to 21 per cent at the last MPC meeting.
Following three months of consecutive declines in inflation however, consumer price inflation rose from 11.9 per cent in July to 12.3 per cent in August 2017, driven by both food and non-food prices.
Core inflation, as measured by the BoG; excluding energy and utility price changes, also went up from 12.6 per cent in July to 13.1 per cent in August 2017, an event which Dr Addison said was an indication of emerging pressures, and thus required further monitoring.
“Since August 2017, there have been upward adjustments in ex-pump petroleum prices which are likely to transmit through prices in the coming months and pose some risks to the inflation outlook,” he stated.
On the global front, whilst improved global growth prospects and accommodative monetary policy stance in advanced economies have impacted favourably on Ghana’s external position.
He said recent signals of monetary policy normalisation could result in tight global financing conditions, which may put some pressures on balance of payments in the outlook.
Dr Addison however, was confident that the Ghana’s medium term inflation target could be achieved by second quarter of 2018, barring any unanticipated shocks.
He said the Bank’s latest survey showed a further decline in inflation expectations across various sectors including businesses, consumers and the financial sector, in spite of the increases in headline and core inflation.
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