The Bank of Ghana (BoG) Monetary Policy Committee (MPC) has maintained the monetary policy rate at 13.5 percent citing moderate risks to inflation although inflation is expected to rise closer to the targeted upper limit in the near-term.
Addressing a press conference after the MPC meeting on Monday, 27th September, 2021, the Governor of the bank, Dr. Ernest Addison, noted a close monitoring of the inflation situation is necessary so as to respond swiftly to prevent potential second round effects on headline inflation from the rising food inflation.
“Inflation has risen sharply over the last two readings, driven mainly by sustained food price increases. Although food inflation has pushed overall inflation close to the upper limit of the band, core inflation remains relatively subdued. In the view of the Committee, the increase in inflation is mainly due to food inflation which is expected to abate with the onset of the harvest season. This notwithstanding, the latest forecast indicates that inflation will remain within the medium-term target band, but closer to the upper limit in the near-term, in the absence of further unexpected shocks,” he said.
Dr. Addison noted the latest data points a fact that government’s fiscal consolidation efforts are on track, however, with some inherent risks associated with wage settlements and energy sector payments, amid low revenue mobilization. He said the COVID-19 related macro-prudential measures, put in place by the Bank, will continue to be maintained to support the full recovery in economic activity but expresses worry of weakening business sentiments stemming from supply disruptions, adding that it is adversely impacting input costs, driving down short-term company prospects.
“…the Committee was of the view that growth continues to recover from the impact of the pandemic. High frequency economic indicators point to continued recovery in economic activity, even though below pre-pandemic levels.
“While credit to the private sector saw a marginal pickup, the trends remain below expectations largely on account of pandemic-related risk aversion.
On the banking front, the Governor noted that banks’ balance sheets performance remains strong with sustained growth in total assets, investments and deposits with profitability levels remaining high.
He, however expressed concern over banks continuing to increase their investments in high-yielding Government securities to improve their earnings while moderating their credit risk due to uncertainties in the business environment adding that the trend is crowding out credit to the private sector.
“Given these considerations, and the fairly balanced risks to inflation and growth in the outlook, the Committee decided to keep the policy rate at 13.5 percent,” he concluded.
Source: Mohammed Bomanso Issah(Real Estate Times Africa)