The Monetary Policy Committee (MPC) of the Bank of Ghana has maintained its policy rate of 29.5%. The Committee disclosed the significant decline in headline inflation from the beginning of the year as the reason the policy rate has been maintained.
The Governor of Bank of Ghana, Dr. Ernest Addison, who addressed a news conference in Accra yesterday, stated that “The Committee further noted the significant decline in headline inflation from the beginning of the year of more than 12.0 percent.
The percentage of items in the Consumer Price Index (CPI) basket with inflation of more than 50 percent and above is receding, an indication of a strong return to the disinflation path.”
He further added that, 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 confirmed that the Bank of Ghana has signed the Memorandum of Understanding on zero financing to the budget to eliminate fiscal dominance and allow for a faster ease in inflation towards the target band.
The Committee, according to him, observed that the recent global outlook remains uncertain with concerns about the potential spillovers from the recent bank failures in the US, amid a credit crunch and persisting geo-political tensions.
Based on these downside risks, Dr. Addison stated that the global growth is projected to remain subdued in 2023, relative to 2022, thus global headline inflation has moderated in many economies, but underlying inflationary pressures remain strong due to tight labor markets and strong wage growth.
“Central banks have continued to tighten policy rates, though at a slower pace and financing conditions remain somewhat tight.
In the near term, expectations for slower policy rate hikes in the US have weakened the US dollar somewhat, supporting investor risk appetite for emerging market and developing economies’ assets”, he said.
Moreover, according to the report on the domestic front, price developments since the last MPC meeting in March 2023 point to continued easing of inflationary pressures, with two additional consecutive declines in headline inflation.
Also, there has been a further deceleration in headline inflation to 45.0 percent in March and then to 41.2 percent in April 2023. The ease in inflation has been largely supported by monetary policy tightening, relatively stable exchange rate, and declining international crude oil prices which have allowed ex-pump petroleum prices to be adjusted downwards.
“From the beginning of the year to April 2023, headline inflation has recorded a decline of 12.9 percent, non-food inflation has declined by 14.5 percent, while food inflation also fell by 11.1 percent. 4. Underlying inflationary pressures are also easing, as the Bank’s core measure of inflation declined for the fourth consecutive month,” he added.
On the international commodities market, Dr. Addison noted that the prices of Ghana’s key exports remained volatile while brent crude oil prices fell by 21.8 percent on year-on-year basis to US$82.7 per barrel in April 2023, compared with US$105.8 per barrel in April 2022, mainly on the back of reduced demand amid fears of a recession.
On Cocoa prices, he said it remained elevated during the first four months of 2023 driven mainly by lower production volumes from top grower Ivory Coast.
“At US$2,612.80 per tonne in January 2023, cocoa prices rose by 13.0 percent on year-on-year basis to US$2,924.37 per tonne in April. Gold prices have remained bullish this year, supported by economic uncertainty.
“In April 2023, the average price of gold reached an all-time high of US$2,000.69 per fine ounce, up 3.4 percent on a year-on-year basis” he reinstated
According to the Governor, consumer confidence improved on the back of easing inflationary pressures, which led to consumer optimism about prospects of future economic conditions.
The local currency, on the other hand recorded some gains amid positive sentiments on developments in the economy.
The Ghana cedi depreciated by 1.9 percent in March 2023 and appreciated by 0.6 percent, in April.
The marginal recovery was supported by the successful conclusion of the DDEP, progress made with Ghana’s external debt restructuring towards attainment of the IMF programme, weakening US dollar and muted demand pressures.