The Bank of Ghana to announced that the policy rate, the basic rate at which commercial banks lend to borrowers is maintained at 30 per cent.
Announcing this at the 114th Monetary Policy Committee (MPC) press briefing, the Governor of the Bank of Ghana, Dr Ernest Addison said among others that the Committee noted the following factors and developments in arriving at the decision.
He noted the moderation in global economic activity, arising from high inflation, tighter financing conditions, weak demand weighing down on manufacturing output, as well as the moderation in China’s recovery after the sharp rebound in the first quarter.
However, he said, the slowdown in global growth momentum is concentrated in advanced economies with the Euro area a key downside risk, but emerging market and developing economies are expected to post some strong growth at 4.0 percent in 2023.
He said global inflation is expected to remain above central bank targets for an extended period due to strong labour markets and pass-through of energy price shocks.
“The disinflation process is projected to take longer than expected, requiring moderately tighter policies, while the growing uncertainty about the global growth outlook, could trigger repricing of risky assets, sharp tightening of financing conditions, and further strengthening of the US dollar. These could transmit to the domestic economy through the trade and financial channels.
On the domestic front, the Committee observed the overall improving macroeconomic conditions with relatively strong economic growth and a drop-in inflation in August. These developments provide evidence that the policy mix under the three-year IMF Extended Credit Facility is beginning to yield results. Economic activity is rebounding strongly, the exchange rate is stabilising, inflation is declining, and level of foreign exchange reserves has improved. Sustained improvement in these indicators should result in the restoration of real incomes and purchasing power,” he said.
He indicated that the strong growth outturn observed in the first half of 2023 is expected to continue in the third quarter as indicated by the July 2023 update of the Bank’s CIEA.
He added that, Ghana’s PMI lends support to the growth outlook, reflecting improving business conditions. The results from the confidence surveys so far also indicate continued improvement in business and consumer sentiments influenced by the relative stability in the Ghana cedi, and more recently the resumption of the disinflation process. The pick-up in confidence is expected to continue for the rest of the year in line with improving macroeconomic conditions.
“Given these considerations, the Committee decided to maintain the policy rate at 30.0 percent. The Committee further indicated that while the expectation is for continued disinflation, it stands ready to respond appropriately should inflation deviate from these broad expectations,” he said.
By Emmanuel K. Dogbevi