The Central Bank of Ghana (BoG) has increased its monetary policy rate by 200 basis points to 21% as it continues to tighten money supply in the economy and fight inflation. This was made known by the Bank Of Ghana Governor.
This development will make it expensive for businesses and consumers to borrow whiles it will put ongoing loan settlement plans out of the way.
Dr. Henry Kofi Wampah, Governor of the Bank of Ghana, at the end of the Bank’s 62nd Monetary Policy Committee meeting in Accra, indicated that the continues rise in inflation is of challenge to managers of the economy, hence the need for the Bank of Ghana to reduce demand for credit facilities.
Dr. Wampah noted that, ?Prices on the other hand continued to rise since the last meeting as headline inflation reached 16.5 percent. This was on the backdrop of the pass-through of the depreciation of the cedi which pushed up prices of fuel, transport and imported food items. Food inflation was 5.8 percent up from the 5.1 percent recorded in August 2014 while non-food inflation was barely unchanged at 24.1 percent compared to 24.0 percent recorded in August.
Inflation for the month of October reached 16.9 percent, up by 0.4 percent from 16.5 percent recorded in September this year. This puts the government?s end of year inflation target of 15 per cent out of range.
Dr. Wampah said the central has thus taken the decision to, ??Increase the monetary policy rate from 19 percent to 21 percent to ensure that the existing tight monetary policy stance is maintained whilst still operating within the corridor set by the Committee,? and that the Committee was concerned about the outward shift in the medium term inflation path relative to the previous forecast.
“…….The latest forecast indicates that inflation would continue to remain outside the target band but expected to ease gradually towards the medium term target band of 8.0?2 percent in the first half of 2016.?The ease in inflation over the policy horizon is contingent on significant fiscal consolidation and maintenance of the tight monetary policy stance. In the absence of these, the inflation target could take a longer duration in excess of 12 quarters to be achieved, considering the vulnerabilities in the economy.”
He also noted that the Committee decided to maintain the current tight policy stance and at the same time re-align rates in the money market within the interest rate corridor.
Also, government has debunked claims that BoG gave out some amount of money to Fortez, insisting that the money was intact and being kept at the BoG.
Dr Henry Kofi Wampah has also said, ?As far as I am aware, we didn?t give anything to Fortiz and Fortiz cannot take any money directly from us.?
According to him, the tier two pensions account belongs to the National Pensions Regulatory Authority (NPRA) which has the sole authority to give instructions on how the funds in the account can be utilized.
?So Fortiz cannot walk into the Bank of Ghana and say give me money to go and invest in another bank,? he intimated.
However, Dr Wampah has confirmed that monies accrued in the tier two pensions account at the BoG currently stands at GHC 1.6 billion, disclosing that the NPRA has three accounts at the central bank where proceeds from the tier two pensions are deposited and kept.
The bank, he said invests the funds based on the directive from the Authority.
?We invest them in instruments; mainly government instruments, treasury bills and so on,? Dr. Wampah explained.
The government and some 12 labour unions are battling it out in the law courts over the management and payment of the tier two pension funds of public sector workers.
