On Monday, the Monetary Policy Committee (MPC) of the Bank of Ghana maintained the policy rate at 30.0 percent for two successive meetings, the Governor of the Central Bank announced.
The Committee, Dr. Ernest Addison said, noted tighter financing conditions, slower growth in the manufacturing and services sectors, and China’s slower recovery were exerting some moderating influence on global economic activity.
The governor made these disclosures when he spoke at a press briefing after the 115th MPC meeting in Accra.
The Committee deliberated on global and domestic macroeconomic developments, including the implementation of the IMF-supported Extended Credit Facility programme for the first six months of 2023 and assessed risks to the inflation outlook.
The governor said central banks were expected to maintain policy rates at high levels for much longer periods to contain the still-elevated inflation levels relative to targets.
He said the prevailing higher policy rates, long-term bond yields, and renewed strength of the US dollar could continue to keep global financing conditions tight, with consequences for emerging markets and developing economies.
On the domestic macroeconomic environment, the Committee observed broad economic improvements, reflecting stable exchange rates, the sustained disinflation process, and increased accumulation of foreign exchange reserves.
These developments reflect improvements in underlying policies, including fiscal consolidation, zero financing of the budget by the central bank, and relatively favourable external conditions.
He said the improvements would be sustained by maintaining tight Central Bank monetary conditions, sustained fiscal consolidation, and continued reserve accumulation supported through the Gold for Reserves programme.
On growth, the governor said domestic economic activity continues to recover, as evidenced by the steady improvement in the Bank’s high-frequency economic indicators. The Governor said the CIEA was recovering from negative territory and was likely to turn positive by year-end, showing a more solid rebound in economic activities.
He said private sector credit growth, however, remained dampened due to risk aversion by banks amid tightened policy conditions and rising credit risk.
Dr. Addison said the external payment position was expected to improve, underpinned by continuous implementation of the IMF-supported program and the Gold for Reserves programme, among others.
He said headline inflation had continued to decelerate in the past few months, consistent with forecasts; meanwhile, the latest Bank forecast indicated that the disinflation process was expected to continue, supported by the current tight monetary policy stance, relatively stable exchange rate, and base drift effects.
The Committee noted that although inflation was decelerating, it remained high relative to the target; therefore, there was a need to keep the policy rate tighter for longer until inflation was firmly anchored on a downward trajectory towards the medium-term target.
The Committee, the Governor added, will continue to monitor developments in the banking sector and deploy other policy tools, as and when required, to support stability.