Bank of Ghana has maintained the policy rate at 14.5 percent for the fifth time.
In a statement issued by the Bank of Ghana, the Governor of the Central bank, Dr. Ernest Addison, attributed the decision to the balance of risks to inflation and steady growth of the economy.
“Risks to inflation in the near-term are broadly contained, but short to medium-term risks emanating from the fiscal expansion and rising crude oil prices are emerging. Under these circumstances, the Committee has decided to keep the policy rate at 14.5 percent,” he said.
Touching on Inflation, a key driver of the policy rate, Dr. Addison further explained that, “Headline inflation, while on steady decline in the early months of the last quarter of 2020, jumped in December to 10.4 percent, outside the target band of 8±2 percent, driven by food prices. However, the Bank projects headline inflation to return to target in the second quarter of 2021.”
The Governor however expressed fear about the renewed threat of the second-wave which could slow down economic recovery.
“In the domestic economy, growth has picked up since the sharp contraction in the second quarter. All the high-frequency indicators of economic activity have rebounded, consumer and business confidence levels are back at pre-lockdown levels, and there are indications of steady growth in private sector credit. However, the renewed threat from the second-wave of the pandemic has again heightened uncertainty and could hamper the recovery process in the near term,” he added.
The Monetary Policy Rate is of keen interest to businesses, as it determines the rate at which the BoG lends to commercial banks, and subsequently influences interest rate on loans.
The unchanged policy rate means cost of loans will remain same at least for the next two and half months, unless there is a change in some economic factors