As a result of the improvement in the macroeconomic conditions with relatively strong economic growth and drop-in inflation, the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has maintained its policy rate at 30%.
Addressing the media, the Governor of the Bank of Ghana, Dr. Ernest Addison, indicated: “Given these considerations, the Committee decided to maintain the policy rate at 30.0 percent. The Committee further indicated that while the expectation is for continued disinflation, it stands ready to respond appropriately should inflation deviate from these broad expectations.”
According to the Governor, these developments provided evidence that the policy mix under the three-year IMF Extended Credit Facility was beginning to yield results, and economic activity was rebounding strongly, the exchange rate was stabilising, inflation declining, and the level of foreign exchange reserves had improved.
On the implementation of fiscal policy, he asserted that while policies remained consistent with the IMF supported programme thus far, challenges associated with revenue mobilisation persist and would require additional efforts to safeguard the revenue-led fiscal adjustment programme.
Mr. Addison, further on inflation dynamics, said the continued maintenance of a tight monetary policy stance and relative exchange rate stability had contributed significantly to the disinflation process observed in the year thus far.
“Headline inflation has declined by a cumulative 14.0 percent since the peak of 54.1 percent recorded in December 2022. Non-food inflation has also declined sharply by close to 20 percent, broadly reflecting the effectiveness of monetary policy. All core inflation measures, monitored by the central bank are trending downwards, indicating continued easing of underlying inflationary pressures. In addition, one-year ahead survey-based inflation expectations seem well anchored.
“While the disinflation process has resumed, which should result in a gradual return towards the target band over the medium-term barring unanticipated shocks, rising international crude oil prices and adjustments to utility tariffs remain a risk to the inflation outlook which would have to be managed through monetary policy vigilance,” he added.
He noted that the disinflation process is projected to take longer than expected, requiring moderately tighter policies, while the growing uncertainty about the global growth outlook, could trigger re-pricing of risky assets, sharp tightening of financing conditions, and further strengthening of the US dollar.
Mr. Addison reinstated that the IMF has revised global growth to slow down from 3.5 per cent in 2022 to 3.0 per cent in both 2023 and 2024 and for Emerging Market and Developing Economies (EMDEs) growth is projected to be broadly stable at 4.0 per cent in 2023 and 4.1 per cent in 2024.
The Committee stated that the moderation in global economic activity, arising from the high inflation, tighter financing conditions, weak demand weighing down on manufacturing output, as well as the moderation in China’s recovery after the sharp rebound in the first quarter.
The slowdown in global growth momentum is however, he disclosed, “concentrated in advanced economies with the Euro area a key downside risk, but emerging market and developing economies are expected to post some strong growth at 4.0 percent in 2023. Global inflation is expected to remain above central bank targets for an extended period due to strong labour markets and pass-through of energy price shocks.”
