The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has maintained its policy rate unchanged at 14.5 per cent.
Explaining the rationale for its decision, the Committee said its view was that risks to the immediate outlook for inflation and growth were broadly balanced.
“In sum, the drivers of economic growth are 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. However, this has come at the cost of moving away from the consolidation path and could pose a risk to long-term macroeconomic stability if decisive measures are not taken to define a feasible fiscal adjustment to stabilise debt,” Dr. Ernest Addison, Governor of the BoG, disclosed.
The Governor further said headline inflation, after peaking at 11.4 per cent, had eased to 10.5 per cent, slightly above the upper band target.
“With the easing of the COVID-related food price pressures and continued stability in the exchange rate, a gradual and steady return of inflation to target is anticipated over the horizon. Underlying inflation and inflation expectations are easing. 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 explained.
Commenting on the global economy, he said it has begun to show signs of recovery, adding that 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. However, there are uncertainties in the external environment which need to be carefully monitored to ensure that Ghana continues to safeguard international capital market access,” Dr. Addison stated.