The central bank has, for the third consecutive time, maintained the country’s policy rate, citing risks pose to macroeconomic stability coming from the increment in utility tariffs, subdued business sentiments, and the slow pace of fiscal consolidation as reasons.

In a press statement released by the Monetary Policy Committee (MPC) of the Bank of Ghana last Friday, the policy rate was, again, maintained at 16 percent.

“On the domestic front, economic activity remains strong and broadbased. Although there are some downside risks to growth, mainly from subdued business sentiments and increase in utility tariffs…The Committee, however, observed that the pace of fiscal consolidation has slowed down, mainly reflecting gaps in revenue mobilization while the pace of spending has increased. This could pose risks to macroeconomic stability if not addressed.

The Committee noted that while these risks remain, the Bank’s core mandate of price stability appears to be on track. Inflation has remained within the target band in the last 15 months.

The Committee assessed that the pass-through from exchange rate depreciation is waning and the underlying inflationary pressures as well as inflation expectations are well-anchored. Under the circumstances, the Monetary Policy Committee decided to maintain the policy rate at 16 percent,” the Monetary Policy Committee statement stated.

This decision, however, does not come as a surprise as various economic analysts and research organisations predicted the MPC to, at worst, maintain the policy rate ahead of the announcement. The Economist Intelligence Unit (EIU), for example, said in its June Country Report for Ghana that, it does not expect the MPC to reduce the policy rate for the rest of the year, giving risk to inflation increasing in the future.

Monetary policy in Ghana has historically been volatile. In January 2019 the monetary policy committee of the Bank of Ghana (BoG) reduced the policy rate by 100 basis points, from 17 percent to 16 percent. Inflation is forecast to remain elevated in 2019, moderating slightly to 9.6 percent, from 9.8 percent in 2018, suggesting that rates will not be cut further over the year,” the EIU report said.

The Bank of Ghana is, however, confident that the measures put in place by government will address these stability concerns and make credit affordable to the private sector.