For a sixth consecutive time, the Monetary Policy Committee (MPC) of the Bank of Ghana has maintained the monetary policy rate at 16 percent, citing the risks to the inflation outlook as its reason for not loosening monetary policy despite significant falls in inflation, cedi exchange rate stability and improved foreign reserves.
Briefing the media during the final meeting of the MPC for 2019, the Governor of the central bank, Dr. Ernest Addison noted that the decision was taken after the committee assessed the chances of achieving the inflation target for 2019.
The three readings of inflation since the release of the rebased Consumer Price Index by the Ghana Statistical Service show that inflation has remained below its central path of 8 percent. Headline inflation declined from 7.8 percent in August 2019 to 7.6 percent in September, but has since inched up to 7.7 percent in October on the back of the recent upward adjustment in administrative prices of electricity and water.
Forecasting ahead, the Governor noted that, inflation is projected to stay within the medium-term target of 8±2 percent over the forecast horizon.
“Inflation expectations for businesses, consumers, and the financial sector, appear to be well-anchored within single digits despite a slight pick-up in the Bank’s measure of core inflation (headline inflation excluding fuel and utilities),” Dr. Addison said.
Although the overall stance of the 2019 budget was geared towards sustaining the consolidation process and growth, Dr. Addison noted that the execution of the budget in the first three quarters of 2019 indicates some risks to the fiscal consolidation path which was achieved over the past two years.
He said, “Primarily, the fiscal performance has been constrained by significant revenue under-performance, posing threats to the overall fiscal outturn. Re-aligning the fiscal deficit to the end-year targets will require expenditure rationalization. This must be underpinned by value-for-money principles to create the necessary fiscal space to support government’s flagship projects.