Dr. Ernest Addison
The Monetary Policy Committee of the Bank of Ghana (BoG) has maintained the Monetary Policy Rate (MPR) at 19 per cent.
According to the Committee, the rate was maintained to enable it observe the impact of the recent monetary policy measures taken.
BoG Governor and chairperson of the Committee, Ernest Addison, said the Central Bank has responded decisively with its policy tools over the last few months increasing the policy rate by a cumulative 550 basis points since November 2021 and tightened liquidity conditions.
He said the Committee expects that the macroeconomic framework that will underpin an agreed IMF supported programme will present a stronger coordinated monetary and fiscal policy framework that will anchor stability and prevent a wage-price spiral, which will lead to inflation becoming more entrenched.
“Initial talks have begun, and it is envisaged that a Fund-supported programme will help re-anchor expectations through implementation of reforms to restore creditworthiness, and eventually lead to a regain of access to the international capital markets.
The markets have already started internalizing the positive effects of the engagement with the IMF,” he said.
Dr. Addison said the financial sector indicators remain healthy, with some improvement in asset quality reflected in the lower NPL ratios compared with April 2022.
He thus noted that akin to the slowdown in global growth, domestic growth is moderating, as high inflation, supply bottlenecks, and exchange rate uncertainty act as a drag on economic activity.
He added that the softening of business and consumer confidence since the last quarter of 2021 and the measured CIEA growth are providing evidence of this slowdown as the technical staff project that GDP growth will likely slow down to within 3.7- 4.5 percent from the projection of 5.8 percent for 2022.
“The banking sector continues to exhibit strong performance, in the face of challenging headwinds from the macroeconomic environment.
However, the recent developments in the macro economy may pose some upside risks to the sector’s outlook and will require strong risk management by the industry and effective supervision,” he added.
Dr. Addison said a detailed review of the consumer basket shows that although initially driven by supply side shocks, the initial relative price changes have broadened to almost all the items in the consumer basket with over 80 percent of the items in the basket recorded inflation above 20 percent.
“The Committee expects that the macroeconomic framework that will underpin an agreed IMF supported programme will present a stronger coordinated monetary and fiscal policy framework that will anchor stability and prevent a wage-price spiral, which will lead to inflation becoming more entrenched,” he added.
By Hudda Abdul Manan Bala