BoG maintains policy rate at 14.5 per cent

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG), for the fourth consecutive time, has maintained the monetary policy rate at 14.5 per cent, citing a positive growth outlook and low risk to inflation.

The monetary policy rate was reduced by 150 basis points from 16 per cent in January this year to 14.5 per cent in March and since then the rate has been maintained at 14.5 per cent.

The Governor of the BoG, Dr Ernest Addison, who disclosed this at an MPC news conference in Accra yesterday, said the monetary policy rate was maintained because “risks to the immediate outlook for inflation and growth are broadly balanced”.

He explained that the drivers of economic growth were returning to normal with prospects for a good recovery.

“Monetary and fiscal policies have been supportive, providing the necessary underpinnings for the economy to withstand the negative output shock arising from the pandemic [COVID-19],” Dr Addison said.

The Governor said the headline inflation after peaking at 11.4 per cent had eased to 10.5, slightly above the upper band target.

“The latest staff forecast shows a somewhat improved outlook compared to the last MPC and in the absence of unanticipated shocks, inflation should return to the medium-term target by the second quarter of 2021,” he said.

He said notwithstanding the contraction in the second quarter, data available to the BoG showed “some green shoots of rebound in economic activity,” stressing that surveys conducted by the BoG in August indicated that “consumer confidence is bouncing back strongly and is currently above pre-lockdown levels.”

“The real Composite Index of Economic Activity (CIEA) grew by 3.6 percent in July 2020, compared with a contraction of 10.6 per cent recorded in May.   Consumer spending, industrial consumption of electricity and construction activities have all reached pre-lockdown levels, while tourist arrivals and port and harbour activity are gradually edging upwards.”

Dr Addison said Ghana Purchasing Managers Index, which gauges the rate of inventory accumulation by managers of private sector firms and measures dynamics in economic activity, pointed to a steady rise in business activity since April 2020.

On the global front, the Governor said global inflationary pressures remained broadly subdued, driven by low energy prices and core inflation remained low in advanced economies with inflation projections having  been generally  revised downwards in the near-term.

“The global economy has begun to show signs of recovery.  The recovery and improving sentiments on global financial markets should help ease pressure on emerging market currencies.  Emerging market sovereign spreads have tightened in response.  The external environment, which has improved, should provide support to Ghana’s economic recovery,” the Governor said.

On the country’s international reserves, Dr Addison said Ghana’s Gross International Reserves at the end of August 2020, stood at $8,561.9 million, providing cover for four months of imports of goods and services.


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