BoG retains policy rate at 25.5 per cent

BoG Pix

Governor Abdul-Nashiru Issahaku

The Monetary Policy Committee of the Bank of Ghana (BoG) has retained its policy rate at 25.5 per cent, Governor Abdul-Nashiru Issahaku has said.

Addressing a news conference in Accra yesterday, Dr. Issahaku who chairs the committee, said members settled on maintaining the current monetary policy rate because it viewed the “risks to inflation and growth as balanced”.

He said the committee observed declining trends in headline inflation, core inflation and inflation expectations as positive for the economy.

“Inflation continues to ease, closing the year at 15.4 per cent from 15.8 per cent in October 2016, supported by tight monetary policy and relative stability of the exchange rate,” he said.

Additionally, underlying inflation pressures, measured by core inflation, he said declined significantly from 15.2 per cent in October, to 14.7 per cent in November, and further to 14.6 per cent in December last year.

“Also, inflation expectations by consumers and the financial sector eased in line with trends in headline inflation,” Dr. Issahaku said.

The developments in headline inflation during the year, he pointed out, were broadly in line with the central bank’s 2016 forecasts.

He explained that the committee reviewed the underlying assumptions in the forecasting framework to reflect the recent “underlying assumptions in the forecasting framework were revised to reflect the recent upward adjustments in ex-pump prices, exchange rate depreciation and a higher than budgeted fiscal deficit outturn for 2016”.

The inflation outlook, the Governor said, could improve if the fiscal consolidation process was restored, alongside monetary policy tightness and exchange rate stability.

Dr. Issahaku noted that although growth conditions remained modest, prospects were positive due to improved oil and gas production from the new oil fields and the gradual rebound in growth in private sector credit.

He said a stronger dollar currency and rising global bond yields, on the back of expected hikes in Fed funds rate could impact adversely on Ghana’s balance of payments, fiscal operations and the inflation outlook.

By Claude Nyarko Adams

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