The Monetary Policy Committee (MPC) of the Bank of Ghana has maintained the Monetary Policy Rate (MPR) at 29.5 per cent on the back of local and global inflation.
The policy rate is basically the rate at which the BoG borrows to commercial banks in the country, which serves as benchmark for the banks to lend to the public.
According to the Committee, the underlying inflationary pressures were easing, as the bank’s core measure of inflation declined for the fourth consecutive month.
“Core inflation, which excludes energy and utility prices, declined to 41.7 per cent in April 2023, from 44.6 per cent in March, and 52.0 per cent in February. Similarly, the banking sector’s inflation has declined by 14.5 per cent, while food inflation also fell by 11.1 per cent,” the MPC stated.
Addressing the media in Accra yesterday after the 112th regular meeting of the MPC, days after Ghana clinched the $3 billion Extended Credit Facility with the International Monetary Fund for balance of payment support and to restore macroeconomic stability, Dr Ernest Addison, who is the Chairman of the MPC, said the MPC noted the significant decline in headline inflation from the beginning of the year of 12.0 per cent.
He said the percentage of items in the Consumer Price Index basket with inflation more than 50 per cent and above was receding, which was an indication a strong return to the disinflation path, adding that core inflation, excluding energy, was easing at a faster rate.
“The tight monetary policy through additional liquidity management operations to address excess liquidity conditions in the market, relative stability in the local currency, and easing of ex-pump petroleum prices have supported the disinflation process,” Dr Addison stated.
The Governor said the BoG had signed a Memorandum of Understanding on the zero financing to the budget to eliminate fiscal dominance and allow for a faster ease in inflation towards the target band of below 10 per cent.
Dr Addison said the recent approval of the $3 billion ECF had reinforced recovery efforts aimed at restoring macroeconomic stability and debt sustainability.
“This should further help re-establish investor confidence in the domestic economy,” he stated.
On the international front, Dr Addison said, global headline inflation continued to ease in several economies, reflecting synchronised monetary policy tightening, and declining energy and food prices, adding developments in the global economy would have implications on the local economy.
He said though the global economic outlook remained uncertain, the latest Purchasing Mangers’ Indices pointed to some rebound in economic activity driven mainly by the services sector.
Banking Consultant, Nana Otuo Acheampong, commenting on the decision of the MPC to maintain the policy rate, said the decision to maintain the policy rate was the best in the circumstance, and he was not surprised at the new MPR rate.
“I did not expect the MPC to increase the policy rate but maintain or decrease it, since the factors fuelling inflation are easing, even though it is not at the levels we are expecting,” he stated.
BY KINGSLEY ASARE