Ghana: Monetary policy unchanged as inflation soars

By Dasmani Laary
Posted on Tuesday, 26 January 2016 17:22

The bank had in the last review attributed its decision to keep interest rates unchanged to high inflationary trends and the cedi’s instability, but officials told journalists on Monday that they maintained rate because the medium term inflation forecasts remained “broadly steady” at an average of 8 per cent for early 2017.

for us there is no need to take discretionary action on devaluation

“After concluding deliberations on the economy, the rate was maintained following a reduced pace noticed in inflationary trends, the committee has decided to maintain the policy rate at 26 per cent,” Bank of Ghana head, Henry Wampah said in the capital, Accra.

“This indicates some moderation in price movements over the previous month. The slower pace of inflation reflects the tight monetary policy stance and the on-going fiscal consolidation.

“In addition, our latest survey shows that inflation expectations have broadly moderated.”

The monetary policy committee, therefore, concluded that the current “tight monetary policy stance”, supported by continued fiscal consolidation and improvement in the energy situation, would provide the necessary impetus to curtail inflation pressures.

Prior to the rate announcement, there were mixed views about the possibility of the bank increasing the rate due to inflationary pressures and instability of the local currency, the cedi.

Interest rates in the West African nation averaged 17.24 per cent from 2002 to 2015, according to analysts, reaching a record high of 27.5 per cent in March of 2003 and a record low of 12.5 per cent in December of 2006.

Following the Bank of Ghana’s decision to maintain interest rates, the country’s commercial banks are also not expected to change their lending rates, which are hovering at over 30 per cent.

The central bank governor also dismissed calls for the devaluation of the cedi ahead of the establishment a common monetary zone, which the region wants to introduce.

“Our rates generally have been floating because the rates change according to the markets, whether speculative or not, the rate continues to change, so, for us there is no need to take discretionary action on devaluation, because the currency adjusts as and when the conditions change,” Wampah said. buy CVV

“In our situation, the movement is done according to market conditions, which include cedi liquidity, fiscal and monetary policies.”

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