BoG Defines State of Economy and Lending Today

By Ernest KISSIEDU

The Monitory Policy Committee of the Bank of Ghana (BoG) is expected to announce its decision on the current state of the economy later today.

As is the norm, the BoG will also indicate whether it has revised the monetary policy rate when it meets journalists in Accra today.

After the previous MPC meeting in Accra in May this year, the BoG reduced its key lending rate to commercial banks by 100 basis points to 22.5 percent, down from the previous rate of 23.5 percent.

That was the second reduction for this year after the biggest rate cut in a long while in March.

Ahead of today's announcement, the MPC held its 77th regular meeting on Friday, July 21, 2017 to review developments in the economy. This was preceded by a Pre-MPC session held on Wednesday, July 19, 2017.

In May, BoG Governor, Dr. Ernest Addison, highlighted stable inflation as the reason for reducing the policy rate.

Briefing a section of the media after the previous MPC meeting in Accra, the Governor emphasized the need to put a high premium on stability of prices.

"There are indications that growth is likely to remain significantly stable, alongside an improved inflation outlook, which provides some scope for monetary policy easing. Also, headline inflation and inflation expectations have broadly trended downwards.

"The disinflation process has been supported by tight policy stance and exchange rate stability," he added.

For the BoG Governor, the down size risk was lower compared to high size risks in relation to the stability of the cedi.

"With the stable outlook for exchange rate movements and the return to the path of fiscal consolidation, headline inflation is expected to trend towards the medium-term target in 2018, barring any unanticipated shocks," Dr. Addison had pointed out.

The Governor had indicated that the volatility in the foreign exchange market observed at the last MPC meeting had eased significantly, supported by improved foreign exchange liquidity conditions and the outturn in the trade balance, with a more positive outlook based on significant expected inflows.

"Cumulatively, the Ghana Cedi has depreciated by 1.0 percent against the US dollar in the year to 18th May 2017, compared with 3.5 percent reported at the previous MPC round."

"Gross International Reserves increased to US$6.4 billion, an equivalent of 3.7 months of import cover, at the end of April 2017 from US$4.9 billion (2.8 months of import cover) at end-2016," he cited.

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