Bank of Ghana cuts benchmark rate by 100 bsp on favorable conditions

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Dr. Ernest Addison
Dr. Ernest Addison

At the end of its 86th regular meeting, the Monetary Policy Committee(MPC) of Ghana’s central bank revised downward by 100 basis points its benchmark policy rate to 16 percent, Governor Ernest Addison announced Monday.

He said the decision was based on the reduced risk to the disinflation path and positive growth outlook.

“The Committee noted that the immediate risk to the disinflation path is well contained, and the current conditions provide scope to translate some of the gains in the macro stability to the economy,” Addison announced.

Ghana’s inflation rate, which was about 14 percent in January 2017, has declined sturdily till it got to 9.4 percent at the end of last year.

“The bank’s latest forecast shows that inflation will remain within the target band of 8 percent, plus or minus 2 percent over the medium term forecast horizon,” he added.

The central bank of Ghana is just emerging from a banking sector clean-up process which saw as many as nine banks going down under between 2017 and this month.

The governor said 2018 ended on a “solid note” with a more consolidated banking sector as weaker and undercapitalized banks that posed risk to financial stability had been removed.

Based on preliminary banking data, the central bank disclosed that the execution of the 2018 budget resulted in an overall budget deficit of 3.8 percent of the rebased economy.

Early this year the government announced the passage of the Fiscal Responsibility Act and the establishment of Fiscal Council, the Financial Stability Council and the reconstituted Economic Policy Coordinating Committee all in an effort to ensure fiscal discipline and entrench macroeconomic gains made so far.

With external financing terms remaining tight and uncertain with attendant financing risks to the budget and implications for exchange rate, Addison urged the government to re-direct financing policy mix toward more domestic financing.

“This will reduce the burden of exchange rate, reserve accumulation and monetary policy,” the governor added. Enditem

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