The Monetary Policy Committee (MPC) of the Bank of Ghana has opted to retain the Policy Rate at 29% , citing ongoing inflation risks that necessitate vigilant monitoring. Dr. Ernest Addison, the Governor of the Bank of Ghana, announced this decision during a press briefing.
Dr. Addison explained, “Overall, risks to inflation are slightly on the upside and will require close monitoring. Given these considerations, the committee decided to maintain the monetary policy rate at 29% .”
The Governor highlighted recent inflation trends, noting a slight uptick in January 2024 followed by a modest decline in February. However, he cautioned about potential factors contributing to inflationary pressures, including adjustments in transport fares, utility tariffs, higher export petroleum prices, and exchange rate depreciation.
Regarding global economic conditions, Dr. Addison acknowledged stronger-than-expected growth and declining global inflation rates. He emphasized the growth momentum supported by resilience in major advanced economies and emerging markets, alongside projected rebounds in the Euro Area.
Looking ahead, global growth is forecasted to remain steady at 3.1% in 2024. However, Dr. Addison warned about potential risks stemming from geopolitical tensions and supply constraints associated with developments in the Red Sea.
Domestically, Ghana's economic performance in 2023 exceeded targets, with fourth-quarter GDP growth reaching 3.8% across all sectors. Additionally, the Composite Index of Economic Activity (CIEA) improved in January, indicating a rebound in economic activity supported by positive sentiments and upticks in business purchasing activity.
Despite these positive indicators, private sector credit remained sluggish due to banks' risk aversion amid weakened asset quality. Nonetheless, external sector conditions remained favourable, with improving reserve buffers, although the Ghana cedi faced strong demand pressures in the initial months of the year.
Looking forward, Dr. Addison expressed optimism about the relative stability of the Ghana cedi, buoyed by inflows from international institutions and expectations of a weaker US dollar.
Regarding the banking sector, Dr. Addison reassured stability, with most banks meeting capitalization requirements and experiencing improved liquidity and profitability positions. However, challenges persist, particularly in clearing arrears in the energy sector and revenue shortfalls.
Dr. Addison concluded by affirming the government's commitment to fiscal targets outlined in the IMF ECF-supported program, emphasizing the need for effective commitment control to manage expenditure and revenue flows effectively in 2024.
