The Monetary Policy Committee (MPC) of the Bank of Ghana has raised the policy rate from 25 to 26 per cent, the Governor, Dr. Henry Kofi Wampah announced today in Accra.
According to Dr. Wampah, with inflation at 17.4 per cent in October, same as in September and up from 17.3 percent in August, that indicates some moderation in price movements over the past three months, supported by tight monetary policy stance, the appreciation of the exchange rate in July as well as falling international crude oil prices.
“This notwithstanding, the current level of inflation and the latest inflation expectations remain far above the medium term target band of 8±2 percent. Core inflation (CPI inflation excluding energy and utility prices), which typifies underlying inflation, has also continued to rise over the period,” he said.
He noted that, there are also imminent upside risks to the inflation outlook such as worsening external financial conditions and the planned utility tariff adjustments which are now likely to be higher than anticipated during the last MPC.
Dr. Wampah stated that assessments of current economic conditions show that though monetary policy remains tight, some additional tightening is required to re-anchor the displaced inflation expectations.
“This, together with the on-going fiscal consolidation, is expected to break the high inflation inertia. Our current forecasts show that without any additional policy adjustment, inflation is likely to drift farther away from the target band and lengthen the forecast horizon into late 2017,” he said.
On the national currency, he indicated that on a year-to-date basis, the Ghana cedi depreciated by 15.5 per cent as at October 2015 compared with 31.2 per cent in the corresponding period of 2014.
“Going forward, maintaining a tight monetary policy stance will reinforce the relative stability in the foreign exchange market and dampen risks related to the external financial conditions,” he said.
By Emmanuel K. Dogbevi