The Monetary Policy Committee maintains the monetary policy rate at 14.5%

The Bank of Ghana’s Monetary Policy Committee (MPC) has kept the policy rate at 14.5 percent, citing better prospects for growth and inflation.

At a press conference in Accra, Central Bank Governor Dr. Ernest Addison said that the drivers of economic growth were returning to normal with prospects for a good recovery.

“Monetary and fiscal policies have been supportive, providing the necessary foundations for the economy to withstand the negative impact of the product derived from the pandemic,” he said.

However, he said that the gains came at the cost of moving away from the consolidation path, which could represent a risk for long-term macroeconomic stability if decisive measures are not taken to define a feasible fiscal adjustment to stabilize the debt.

Dr. Addison said the latest staff forecast showed a somewhat improved outlook compared to the last MPC, and in the absence of unforeseen shocks, inflation should return to the medium-term target by the second quarter of 2021.

Dr. Addison said headline inflation, after peaking at 11.4 percent, has dropped to 10.5 percent, slightly above the target for the upper band.

“Core inflation and inflation expectations are declining,” he said.

Regarding the real economy, he said that despite the contraction in the second quarter, the indication was a better evolution of growth in the third and fourth quarters.

“The main indicators of economic activity point to a recovery, a sustained level in consumer and business confidence, broad-based growth in the CIEA indicators are all favorable to positive growth conditions in the outlook,” he added .

He said that following the above, growth in 2020 was estimated to be between 2.0 and 2.5 percent.
The governor said fiscal policy was a source of considerable stimulus, driven by exceptional spending targeting goods and services, capital expenditures, COVID-related spending and in the energy sector.

He said that with the easing of COVID-related food price pressures and continued stability in the exchange rate, a gradual and steady return of inflation to target is anticipated on the horizon. In short, the world economy has started to show signs of recovery.

The recovery and improved confidence in global financial markets should help ease pressure on emerging market currencies.

He said sovereign spreads in emerging markets had narrowed in response and the external environment, which has improved, should support the country’s economic recovery.

The governor said, however, that there were uncertainties in the external environment, which should be carefully monitored to ensure that the country continues to safeguard access to the international capital market.

On the domestic front, he said the policies and regulatory relief measures introduced by the Bank of Ghana have improved liquidity in the banking system, preserved capital buffers and provided relief to clients severely affected by the pandemic.

These measures have also helped banks and specialized deposit-taking institutions provide support to critical sectors of the economy to mitigate the adverse impact of the pandemic.

The Bank of Ghana will continue to monitor the impact of these aid measures, he added.