As part of its efforts to assess economic trends and take the necessary measures to preserve financial and economic stability, the Bank of Ghana’s Monetary Policy Committee maintained the policy rate at 13.5 percent at its 101st Monetary Policy Committee Meeting.
This is the second time this year that the Central Bank has kept the policy rate unchanged.
According to a statement released by the Monetary Policy Committee, its decision was influenced by the third wave of Covid-19, a large budget deficit owing to revenue underperformance, and the balance of risks to inflation and growth, among other factors.
The Committee also said that, although the global economic recovery is continuing, owing to sustained policy support and increasing consumer confidence, the future remains unclear.
“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 further said, “The banking sector’s performance showed a continued increase in client deposits, investments, total assets, and earnings, and key financial soundness indicators remain strong in terms of liquidity and solvency.” Based on macroprudential risk assessments, the Committee expects the banking system to survive mild to moderate credit risk shocks, but a second wave of the epidemic in Ghana may raise credit risks further and need careful monitoring of banks’ capital and liquidity buffers.”
In terms of fiscal operations, it was observed that the budget deficit surpassed its goal in the first five months, owing mostly to revenue underperformance.
As a result, it was highlighted that in the future, spending must be matched with revenue performance in order to assist fiscal consolidation initiatives.
“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 the 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.
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SOURCE: ATLFM ONLINE
