Bank of Ghana Cuts Policy Rate to 23.5 per cent

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The Monetary Policy Committee has reduced the Policy Rate by 200 basis points to 23.5 per cent from 25.5 per cent, citing the easing of underlying inflation pressures.

The cut done on Monday follows a 50 basis-point reduction in January.

The Governor of the Bank of Ghana, Dr Nashiru Issahaku, told a news conference that the underlying inflation pressures had eased considerably and inflation was projected to trend downwards toward the medium-term target.

The Central Bank has a medium-term inflation target of eight percent, plus or minus two percentage points.

Headline inflation declined for the fifth consecutive month in February 2017.

Inflation fell from 17.2 per cent in September 2016 to 15.4 per cent in December and further down to 13.2 per cent in February 2017.

“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,” Dr Issahaku said.

However, Dr Issahaku said upside risks to the inflation outlook remain the impact of tighter global financial conditions and volatility in commodity prices, which could adversely impact Ghana’s balance of payments, exchange rate and the inflation outlook.

On the external sector performance, the Governor said it continued to improve with provisional estimates of the trade account through February 2017 recording a surplus, largely due to higher export receipts and lower non-oil imports.

For the same period, gross foreign assets increased to an equivalent of 3.7 months of import cover, up from 3.5 months in December 2016.

Dr Issahaku said the foreign exchange market witnessed increased pressures in the year to early March, partly attributed to a strengthening US dollar, seasonal demand factors and speculative activities.

However, he said, the observed pressures had significantly eased in recent weeks on the back of renewed confidence in the economy and improved foreign exchange inflows.

As at 24th March, 2017, the Ghana cedi had cumulatively depreciated by 3.5 per cent against the US dollar, significantly recovering from 8.8 per cent depreciation recorded on March 8.

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