Monetary Policy Rate keeps unchanged at 29%
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has maintained the policy rate at 29 per cent over the uncertainties in the global economy and the slow disinflation in the country.
The policy rate is basically the rate which the BoG lends to the commercial banks in the country which influences the cost of capital.
Speaking at a news conference in Accra yesterday after the 118th regular meeting of the MPC, the Chairman and Governor of the BoG, Dr Addison, said global growth remained relatively strong, bolstered by an expansion of economic activity in large economies.
In spite of the strong global growth, he said, the progress towards attaining inflation targets globally from the year-to-date had somewhat stalled as oil prices had risen due to escalating geopolitical tensions.
Dr Addison said for emerging markets and developing economies, the strengthening of the US dollar and the tight monetary policy stance of the U.S. Fed had induced more headwinds to the disinflation process.
“Due to these developments,
central banks have mostly been cautious to loosen their tight monetary policy stance. In the outlook, however, central banks are expected to start the easing cycle when inflation begins to steadily decline towards targets,” he stated.
On the domestic economy, Dr Addison said the high frequency real sector indicators pointed to a sustained pick- up in economic activity through the first quarter of 2024.
He said the updated real Composite Index of Economic Activity recorded an annual growth of 2.1 per cent in March 2024, compared to a contraction of 6.4 per cent in
the corresponding period of 2023, indicating that the pick-up in the index was driven mainly by increased imports, private sector contributions to SSNIT, and tourist arrivals.
The Governor, however, said the latest confidence surveys conducted in April 2024 pointed to a softening of sentiments and both business and consumer confidence dipped.
He said the country’s disinflation process remained sluggish over the first quarter of the year as inflation, which declined to 23.1 per cent in December 2023, moved up to 25.8 per cent by the end of the first quarter of 2024, and currently at 25.0
per cent on account of improvements in the supply of seasonal food crops which seem to have been countered by increasing non-food inflation from the exchange rate effects.
Dr Addison said the slowdown in the disinflation process was driven in large part by rising food inflation, mainly seasonal food crop items, and expressed the hope that inflation would trend down to between 13 and 17 per cent before the end of the year.
An Economist, Dr Adu Sarkodie, in an interview with the Ghanaian Times said the decision of the MPC to maintain the policy rate at 29 per cent was in the right direction.
