Ghana Central Bank Leaves Benchmark Rate Unchanged at 26%

ACCRA, Ghana, Capital Markets in Africa — Bank of Ghana retained its benchmark rate at 26 percent, as a result ease in inflation pressures, according to statement issued by Ghana’s central bank at the end of the Monetary Policy Committee meeting held on 21^st March 2016.

In February, headline inflation declined to 18.5 percent, dragged down by lower non-food inflation. The monthly inflation rates also indicated some slowdown in February, supported largely by stability in the exchange rate. In addition, core inflation (CPI inflation excluding energy and utility prices) has trended downwards since December 2015, pointing to some easing of underlying inflation pressures.

The drop in both headline and core inflation are encouraging, but the current levels of inflation remain significantly above the medium term target band of 8±2 percent, noted in the press release.

“In assessing the current economic conditions, the committee views the risks to inflation and growth outlook as balanced,” Governor Kofi Wampah told journalist. Furthermore, the Governor said:  “Barring any further shocks, inflation will peak in the first quarter of 2016 and gradually decline thereafter towards the target band by mid-2017.”

Bank of Ghana MPC’s also hinted that he provisional current account deficit in 2015 improved to 7.8 percent of GDP, relative to 9.5 percent in 2014. This favourable development was attributed to an improvement in the services account which outweighed the worsening trade deficit as commodity prices softened. Gross Foreign Assets as at end February was US$5.4 billion, equivalent to 3.1 months of import cover. 

Bank of Ghana has increased the benchmark lending rate by 4 percentage points since July, 2015 to curtail losses in the Ghanaian cedi and fight inflation that soared to a record 19 percent in January, but the actions are yet to have positive impact on the Ghana’s economy ( government expecting expansion of 4.1 percent for 2015).