The Monetary Policy Committee (MPC) of the Bank of Ghana is confident that the country will achieve an annual inflation rate of nine per cent.
Central Bank Governor and Chairman of the Monetary Policy Committee, Mr Kwesi Amissah-Arthur, announced this at a news conference in Accra on July 6, 2011, adding that inflation was under control despite economic growth which is currently running at over 20 per cent per year.
“Inflation has continued to drop and is currently at 8.9 per cent. Based on internal projections, the Bank is confident that the annual inflation rate of nine percent is achievable.”
The bank has consequently lowered its policy rate by 50 basis points from 13 per cent to 12.50 per cent, citing a stable inflation and other macroeconomic indicators.
The drop in the policy rate is expected to prompt the commercial banks to reduce their base rates that will subsequently culminate into a reduction in the interest rates of commercial banks.
“The sources of uncertainty that existed at the last MPC meeting have substantially abated. From the analysis and the data presented, inflation expectations of businesses and the financial sector are well anchored,” he said.
“The current state of the economy and the assumptions on both the domestic and external outlook as well as the inflation forecast suggest that in the near term, stable and favourable economic conditions will hold,” he added.
He said his committee was committed to price stability to provide supportive environment for growth, adding that the Bank was confident that the annual inflation target of nine per cent was achievable.
Inflation as at the end of May stood at 8.9 per cent. Mr Amissah Arthur said the external outlook remained favourable as gold and cocoa prices continue to hold firm.
“On the other hand, crude oil range of price adjustment are uncertain, but forecast to be within tolerable limits, thus reducing the downside risks connected with oil imports,” he said.
Bank of Ghana’s composite index of economic activity showed a year-and-year growth of 26.5 per cent and 19.4 per cent in April and May respectively compared to real growth of 23.7 per cent in the first quarter of 2011.
A survey of consumer and business sentiments conducted in June this year, showed softening sentiments on growth.
The overall business confidence index fell to 104.1 in June from 106.6 in April, with firms less optimistic about the level and intensity of their capital expenditures and expectations of lower sales, profits and employment opportunities.
On the other hand, the consumer confidence index declined from 100.7 in April to 99.5 in June, driven by weaker welfare expectations.
Ghana, which joined the ranks of oil exporting nations in December, last year, remained exposed to the world price of oil for its own energy imports. However, Amissah-Arthur said he expected future market price moves to be “within tolerable limits.”
The US$46-billion-a-year Ghanaian economy is set to see one of the world’s fastest growth rates this year, partly fuelled by oil. Growth in the first quarter leaped to an annual rate of 23 per cent.
However, Amissah-Arthur noted that official surveys on both business and consumer confidence eased in June and added that despite a pick-up in private sector credit, the Bank was still concerned at what he called the “sluggish” response of commercial banks in cutting lending rates.
Source: Daily Graphic/Ghana
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