The Bank of Ghana’s Monetary Policy Committee (MPC) kept the policy
rate unchanged at 22.0 per cent following improvement in the inflation
outlook as the cedi strengthens against the major trading currencies.
Central Bank Governor Dr Henry Kofi Wampah said the Committee
observed that although inflation expectations were still elevated, the
pressures in the outlook for the medium-term were waning.
“This is as a result of the tight monetary policy stance, continuing
fiscal consolidation and the recent recovery of the cedi,” Dr Wampah
said.
The local currency recovered strongly against the major currencies in July 2015.
The cedi was trading at 4.33 to the US dollar as at June 30, 2015
(year-to-date depreciation of 26.2 per cent). However, as at July 14,
2015, it was trading at GH¢3.31 to the US dollar (year-to-date
depreciation of 3.4 per cent).
Dr Wampah said the fiscal consolidation observed since the beginning of the year has continued.
For the period January-April 2015, total revenue and grants exceeded
targets while expenditures were broadly on target. These developments
resulted in a fiscal deficit of 2 per cent of GDP, within the programme
target of 2.6 per cent of GDP.
He said the tight monetary policy stance, evidenced by tight
liquidity conditions in the banking sector, has contributed to the
improvement in the inflation outlook.
Consequently, the latest forecasts suggest that the attainment of the
medium term inflation target of 82 per cent has shifted from the third
quarter of 2017 to the fourth quarter of 2016.
“This notwithstanding, the sources of upside risks to inflation over
the forecast horizon continue to hinge on exchange rate dynamics and its
implications for prices, petroleum and utility price adjustments, and
fiscal impulse,” he said.
Dr Wampah said the stock of gross foreign assets at the end of June
2015 was $4.5 billion, enough to finance 2.9 months of imports of goods
and services.
He said going forward, the anticipated inflows of more than $4
billion from the Eurobond issue, syndicated cocoa financing as well as
other programmed inflows in the second half of the year will provide a
strong buffer and help sustain stability in the foreign exchange
markets.
He said domestic growth conditions remained vulnerable given the
on-going fiscal consolidation and the impact of the energy crisis.
The provisional update to the Bank’s real composite index of economic
activity (CIEA) indicates a slower pace of growth during the second
quarter of 2015 compared to the same period last year.
However, over the medium term, growth prospects remain positive, but
there are potential headwinds, including continued energy sector
challenges, tight credit conditions, weak consumer confidence, and
subdued commodity prices and production.
Dr Wampah said the Monetary Policy Committee has mandated the Bank of
Ghana to introduce additional measures to streamline monetary
operations.
He said to enhance transparency in monetary operations and improve
the transmission mechanism, the monetary policy rate will be merged with
the reverse repo rate within 30 days.
The merger of the rate would be immediately followed by the
introduction of a 7-day reverse repo instrument in the money market to
offer more flexibility in the liquidity management of banks.
In order to improve liquidity in the foreign exchange market, the
Bank of Ghana and the Ministry of Finance have agreed to open the 2-year
Note to non-resident participation. The modalities for this are
currently being worked on.
Dr Wampah said the Bank of Ghana will engage the banks before implementation of the new measures.
Source: GNA
No comments:
Post a Comment