Bank of Ghana cuts policy rate to 23.5%

The Bank of Ghana has announced a reduction of the policy rate from 25.5 per cent to 23.5 per cent.

Announcing the rate reduction at the Monetary Policy Committee press conference today, March 27, 2017 in Accra, the Governor of the Bank, Dr. Abdul Nashiru Issahaku indicated that headline inflation declined for the fifth consecutive month in February 2017.

“Inflation fell from 17.2 per”cent in September 2016 to 15.4 per cent in December and further down to 13.2 per cent in February 2017. The steady decline in consumer prices reflected in both food and non-food prices, driven mainly by the tight monetary policy stance and some base effects,”he said.

The governor noted that the fiscal outturn for 2016 showed a higher deficit than targeted.

“The overall provisional budget deficit was 8.7 per cent of GDP against a target of 5.0 per cent, financed mainly from domestic sources. The fiscal slippage was attributed to both expenditure overruns and revenue shortfalls,” he explained.

Dr. Issahaku, however said, the 2017 budget has signalled a return to the path of fiscal consolidation with a projected deficit of 6.5 per cent of GDP based on improved revenue mobilisation and controlled expenditures.

Among others, the Governance stated that the foreign exchange market witnessed increased pressures in the year to early March, partly attributed to a strengthening US dollar, seasonal demand factors and speculative activities.

“However, the observed pressures have significantly eased in recent weeks on the back of renewed confidence in the economy and improved foreign exchange inflows.

As at March 24, 2017, the Ghana cedi had cumulatively depreciated by 3.5 per cent against the US dollar, significantly recovering from 8.8 per cent depreciation recorded by March 8,”he said.

By Emmanuel K. Dogbevi