The Monetary Policy Committee (MPC) of the Bank of Ghana has maintained the policy rate at 20 percent, despite cutting it by 550-basis points in 2017.

Speaking at the press conference to announce the rate, Governor of the Bank of Ghana, Dr. Ernest Addison, cited emerging pressures in inflation for the latter part of 2017 as the reason to keep the rate at 20 percent.

Dr. Ernest Addison

Dr. Ernest Addison

“While there was a trend decline in headline and core inflation throughout the year, allowing for some 550-basis points policy rate cut, the Committee has observed some emerging pressures in underlying inflation in the last two months of 2017, although inflation expectations appear to be well anchored.

Under the circumstances and to ensure that the inflation target horizon is maintained and the medium-term inflation target of 8±2 percent is achieved this year, the Committee decided to maintain the monetary policy rate at 20 percent,” Dr. Addison said.

Inflation for December 2017 climbed to 11.8 percent, drifting further away from the end-year inflation target of 11.4 percent. Inflationary pressures were further heightened when the price of petroleum products inched up marginally.

The central bank’s decision (maintaining the policy rate) is expected to hold inflation in check and prevent it from moving further from the 9.8 percent target for 2018.

The development has further come as a blow to the private sector as it was expecting the central bank to reduce its policy rate in order to provide commercial banks the space to reduce lending rates.

Currently, lending rates of commercial banks averages 31 percent, a situation that has discouraged businesses from looking to banks for capital for expansion, thereby, stifling growth of many firms.