Ghana Slashes Monetary Policy Rate to 21%

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The Monetary Policy Committee (MPC) of the Bank of Ghana has reduced the policy rate to 21 per cent for July down from the 22.5 per cent of June.

“Foreign exchange market conditions remain stable supported by improved liquidity conditions, the trade surplus and increased reserves. In the year to June 2017, the Ghana cedi recorded a depreciation of 3.7 percent against the US dollar, compared with a depreciation of 3.3 percent reported in June 2016

Gross International Reserves stood at US$5.9 billion, translating into 3.4 months of import cover at end June 2017, compared with US$4.9 billion (2.8 months of import cover) at end of December 2016,” said Dr. Ernest Addison, Governor of the country’s central bank after an MPC meeting on Monday.

The Committee further noted that economic activity continued to improve supported by a rebound in crude oil production, and is expected to remain in line with trends seen in the first half of the year.

The Bank’s CIEA also provides some positive indications of expected increase in economic activity. The broad expectation is that the gradual and steady increases should translate to higher growth profile in the period ahead. In addition, implementation of fiscal policy measures towards providing stimulus through the key initiatives contained in the 2017 budget statement should provide added impetus to growth.

“The disinflation process is still ongoing and this trend is likely to continue all through till to the end of the third quarter. Barring any unanticipated shocks, the current stance of monetary policy and expected stability in the exchange rate should ensure price stability,” the MPC noted.

“Given these considerations, the Committee decided to reduce the Monetary Policy Rate by 150 basis points to 21 percent. The Committee would continue to monitor risks and take the necessary policy action to move headline inflation towards the medium term target,” a statement by the MPC added.

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