The Monetary Policy Committee of the Bank of Ghana, has increased the policy rate from 24 percent to 25 percent as a measure of bringing back inflation within its target.
From 16.9 percent in May, the CPI inflation increased sharply to 17.9 percent in July, mainly reflecting the upward adjustment in petroleum and transport prices.
Even though some moderation occurred in August with inflation declining to 17.3 percent, it was still higher than the June reading of 17.1 percent, suggesting persistent underlying inflationary pressures.
Addressing Financial Journalists in Accra, the Governor of the Bank of Ghana, Dr. Kofi Wampah explained that the committee tightened the policy stance to prevent a target shift in 2017.
The Governor warned that there are potential upward risks to the inflation forecast stemming from the planned significant increases in utility tariffs.
“Consistent with the attainment of the inflation target by the end of 2016 therefore the MPC is determined to prevent first round effects of the likely increases in prices and the higher cedi liquidity during the fourth quarter from being entrenched into elevated inflation expectations”, he said.
Outlining current happenings in the exchange rate regime, Dr. Wampah stated that on month-on-month basis, the cedi appreciated against the US dollar in July by 25.5 percent and depreciated in August by 14.8 percent.
He assured that the currency volatility is expected to moderate due to the tight monetary policy stance and the anticipated inflows from the Eurobond issue and the syndicated pre-export finance facility for cocoa.
