Elsie Addo Awadzi, BoG Second Deputy Governor
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has reduced the policy rate to 13.5 per cent after it had been kept unchanged at 14.5 per cent for at least six consecutive times.
This is a 100 basis points reduction in the rate.
Speaking at the 100th MPC media briefing yesterday, the BoG Governor, Dr. Ernest Addison, said the decision of the committee was influenced by a pick-up in economic activities and recovery towards pre-pandemic levels.
This is expected to impact on the cost of credit in the next two months and stimulate economic growth.
“Headline inflation eased sharply to within the medium-term target band, driven mainly by lower food prices and base drift effects, a tight monetary policy stance and stable exchange rate conditions. Since the initial shock to inflation in April 2020, the forecast showed that inflation will be close to the central target by June 2021. These forecasts remain broadly unchanged and inflation would remain within the target band in the next quarter,” he said.
He further said that “risks to the inflation outlook appear muted in the near-term, but pressures from mostly rents and transport fares, would require some monitoring to anchor inflation expectations.”
Dr Addison said the committee would continue to monitor price developments closely and take appropriate action, where necessary, to contain all potential pressures to the inflation outlook.
Fiscal economy
The central bank Governor further said that there are signs that the execution of the budget for the first four months points to some improved revenue collections and expenditure containment to ensure real re-alignment to the consolidation path.
The MPC also noted risks in the fiscal outlook surrounding wage settlements, energy IPP payments, the potential for arrears build-up, potential for scaled-up expenditures associated with COVID-19 waves and mass vaccination efforts, as well as the implementation of the Ghana CARES programme, which would have to be carefully managed in a time consistent manner to minimize any deviation from the path of fiscal consolidation.
