As part of efforts to review developments in the economy and take the necessary steps to ensure financial and economic stability, the Monetary Policy Committee of the Bank of Ghana, at its 101st Monetary Policy Committee Meeting, has maintained the policy rate at 13.5 percent.
This is the second time the Central Bank has maintained the policy rate, this year.
A statement issued by the Monetary Policy Committee, attributed its decision to the third wave of Covid-19, high budget deficit due to revenue underperformance, as well as the balance of risks to inflation and growth, among others.
The Committee also said although the process of global growth recovery is ongoing, driven by continued policy support and rising consumer confidence, the outlook remains uncertain.
“To summarise, although the process of global growth recovery is ongoing, driven by continued policy support and rising consumer confidence, the outlook remains uncertain. This is due to uneven vaccination across regions, rising Covid-19 infection rates fuelled by new variants of the virus, cases of vaccine hesitancy and divergence in the recovery across jurisdictions”, a statement said.
It also noted that, “The banking sector performance reflected sustained growth in customer deposits, investments, total assets, and profits and key financial soundness indicators remain healthy in relation to liquidity and solvency. Based on macro-prudential risk assessments, the Committee expects the banking sector to withstand mild to moderate credit risk shocks although a new wave of the pandemic in Ghana could further elevate credit risks and would require close monitoring of banks’ capital and liquidity buffers.”
On fiscal operations, it noted that, the budget deficit exceeded its target in the first five months mainly on the back of revenue underperformance.
It thus noted that going forward, expenditure has to be aligned to revenue performance to support the fiscal consolidation efforts.
“Headline inflation has eased sharply and reverted within the medium-term target band, driven mainly by the tight monetary policy stance and some base drift effects. The latest forecast remains broadly unchanged with inflation projected to remain within band and around the central path in the forecast horizon barring any upside risks from fiscal pressures. On the whole, the Committee assessed that the risks to inflation and growth were broadly balanced and decided to keep the policy rate at 13.5%”, the statement added.