The policy rate, which is the rate at which the central bank lends money to commercial banks, at the last monetary policy meeting in July 2017 reduced the rate by 150 bases points from 22.5 percent to 12 percent for almost three months.
The central bank’s Governor Dr. Ernest Kwamina Yedu Addison addressing the press after the 78th regular Monetary Policy Committee meetings in Accra attributed the reduction in the policy rate to Inflationary pressures which have eased considerably.
“Committee noted that, the monetary policy stance has eased in line with declining inflation and underlying inflation pressures since the beginning of the year. At this MPC round however, the Committee decided it was time to pause the easing cycle in view of emerging risks to the inflation outlook, while remaining vigilant and committed to respond and take the necessary policy actions should these initial signs of underlying pressures persist. Consequently, the MPC has decided to maintain the Monetary Policy Rate at the 21 percent.”
“However, there are indications that growth is likely to remain significantly below potential, which alongside an improved inflation outlook provides some scope for monetary policy easing. In addition, recent developments in inflation imply an implicit tightening,” the Governor added.
Meanwhile the Governor Dr. Ernest Kwamina Yedu Addison said “the Committee will continue to monitor developments and take appropriate action necessary towards the attainment of its inflation target of + or – 8%.”
Prior to today’s maintaining of the policy rate there had been calls from the business community as well as some economists for the central bank to either reduce or maintain the rate despite inflation went up slightly to 12.3%.
The BoG has continued to use its monetary policy as an inflation targeting tool to shoot down rising inflation but with inflation trending downwards and the softening of inflationary pressures.