The Monetary Policy Committee of the Bank of Ghana in its latest review of the economy has maintained the policy rate at 16 percent. This is the first review after it was reduced in January by 100 basis points.
The policy rate is the rate at which the Bank of Ghana lends to commercial banks.
At a press conference on Monday, the Governor of the central bank, Dr. Ernest Addison clarified that the decision was considered to curb price inflation and also keep a reign on interest rates in the financial sector.
“The Committee was of the view that the monetary policy stance is relatively tight and real interest rates in Ghana are comparatively high. In the circumstances, the Monetary Policy Committee has decided to keep the policy rate unchanged at 16 percent,” he said.
Interest rates have been creeping upwards over the past year after reaching a five year trough by early 2018. Consumer price inflation rose to 9.2 percent for February after reaching a low of 9.0 percent in January.
Dr. Addison indicated that the Committee will closely monitor developments in the coming months and will not hesitate to take immediate and decisive policy actions including taking a tighter monetary policy stance, should these risks materialize and threaten to dislodge the disinflation process.
The Committee noting the successful conclusion of Ghana’s ECF programme with the IMF, stressed on the need to remain steadfast in implementation of prudent policies to anchor the hard-earned stability in macroeconomic conditions.
“In this respect, the Committee observed that there were risks to the outlook which would have to be monitored very closely. Overcoming these risks would require vigilance and time consistent policy actions,” He said.
The Governor cited an instance where in the energy sector, large foreign exchange payments for excess capacity associated with the ‘Take or Pay’ Power Purchase Agreements has contributed to higher demand for foreign exchange hence the need to manage the situation urgently.
By Joshua W. Amlanu