The Bank of Ghana's (BoG) Monetary Policy Committee (MPC) has kept the policy rate at 30%.
This comes after requests for the central bank to maintain its policy rate from economic experts and the business community in order to stop the country's interest rates from rising further.
At the 114th MPC meeting in Accra today, the Governor of the BoG made this announcement.
He said the committee noted the moderation in global economic activity, which was brought on by high inflation, tighter financial conditions, weak demand weighing down on manufacturing output, as well as the moderation in China's recovery after the sharp rebound in the first quarter. He then went on to explain why the policy was maintained.
The emerging market and developing economies are anticipated to show some good growth at 4% in 2023, according to him, but the decrease in global growth momentum is centered in advanced economies, with the Euro area being a significant negative risk.
He said that on the domestic front, the committee noticed that macroeconomic conditions were generally becoming better, with relatively good economic growth and a decline in inflation in August.
According to him, these developments show that the policy mix implemented as part of the three-year IMF Extended Credit Facility is starting to show results.
"The level of foreign exchange reserves has increased, the exchange rate is stabilizing, inflation is falling, and economic activity is robustly rebounding.
Real earnings and purchasing power should return as a result of continued improvement in these measures, he said.
The Bank's Composite Index of Economic Activity's July 2023 report revealed that the high economic outturn seen in the first half of 2023 is anticipated to continue in the third quarter, according to the Governor (CIEA).
The growth projection is further supported by Ghana's Purchasing Managers' Index (PMI), which illustrates strengthening business conditions.
"According to the results of the confidence surveys conducted thus far, consumer and business attitudes are continuing to improve as a result of the relative stability of the Ghana cedi and, more recently, the restart of the deflationary process. According to strengthening macroeconomic conditions, the confidence improvement is anticipated to last the rest of the year, according to Dr. Addison.
On the execution of fiscal policy, he said that while policies have up to this point remained consistent with the IMF-supported program, issues related to revenue mobilization continue and will call for extra efforts to protect the revenue-led fiscal adjustment program.
As a result of greater gold export revenues, import compression, and decreased outflows from the services and income accounts, the country's external sector position has continued to improve significantly in the first eight months of the year.
"The country's reserve buffers were rebuilt in part as a result of the smaller balance of payments deficit, the domestic gold purchase program, inflows from the mining industry, and the liquidation of some short-term external liabilities.
The expected inflows from the cocoa syndication loan, the second tranche of the IMF ECF program, and other multilateral inflows will further support reserve accumulation in the last quarter of the year, he said.
On the dynamics of inflation, he asserted that the persistence of a strict stance on monetary policy and relatively stable exchange rates had made a significant contribution to the disinflation process seen so far this year.
According to Dr. Addison, headline inflation has decreased by a total of 14.0% since reaching a peak of 54.1% in December 2022.
A persistent lessening of underlying inflationary pressures is shown by the fact that all core inflation gauges being tracked by the central bank are heading downward. Also, forecasts for inflation one year out based on survey data appear to be solidly grounded.
Despite the fact that the disinflation process has resumed, which, barring unexpected shocks, should result in a gradual return towards the target band over the medium term, rising international crude oil prices and changes to utility tariffs continue to pose a threat to the inflation outlook and must be managed through monetary policy vigilance, the official said.
-By Micheal Annah|Mydailyreports24|Ghana
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