The Governor of the Bank of Ghana, Dr. Abdul-Nashiru Issahaku who announced the decision at a press briefing in Accra said “In assessing the current economic conditions, the Committee views the risks to inflation and growth as balanced and decided to maintain the policy rate at 26 per cent.
He said headline inflation was likely to move within the medium-term target band of eight per cent plus or minus two per cent in the third quarter of 2017, against earlier projections of mid-2017.
The Bank’s latest inflation forecast suggests a slight outward shift in the forecast horizon as increases in ex-pump prices of petroleum products slowed the pace of expected disinflation.
“The Bank’s latest inflation forecast suggests a slight outward shift in the forecast horizon as increases in ex-pump prices of petroleum products slowed the pace of expected disinflation,” he said.
He said he expected that inflows from annual cocoa loans and a planned Eurobond in the last quarter would help boost the bank’s assets in support of the local currency.
“We see the exchange rate remaining stable and not deviating from the current expectations,” he said.
On the interbank market, the cedi cumulatively depreciated by 3.3 per cent against the US dollar in the year to June 2016 compared with 26.1 per cent over the same period of 2015.
On the latest update of the Bank’s Composite Index of Economic Activity (CIEA) the Governor said the CIEA reflected some modest pickup in the second quarter of 2016, although at a slower pace than the same period last year.
“Indicators that accounted for growth in the CIEA were industrial electricity consumption, port activities and domestic VAT collections. Also, the latest consumer survey pointed to positive sentiments about the expected changes in household finances and the economic situation,” he said.
Growth prospects for the rest of the year he said would be impacted positively by the stability in the foreign exchange market, continued improvement in consumer and business sentiments, and the realisation of additional oil and gas production from the TEN oil fields.
Dr. Issahaku however, stated that risks to the growth outlook, such as, the tight credit conditions, electricity supply shortfalls and continued fiscal tightness, might moderate the pace of economic expansion.
On the external sector, he said the relatively low commodity prices and reduced volume of exports impinged on the trade balance in the first half of 2016.
The provisional trade deficit over the period he said widened in comparison to the corresponding period last year.
“Over the first six months of 2016, volatilities in the foreign exchange market have subsided significantly alongside relative stability in the local currency largely supported by tight policy stance and improved foreign exchange inflows,” he said.
By David Adadevoh