Bank Of Ghana To Ensure Price Stability Objectives

The Bank of Ghana[BoG] Monetary Policy Committee [MPC] 55th Meeting and Press Conference has taken place at the premises of the Central Bank in Accra with a promise by the Bank to continue to monitor developments and take appropriate measures to ensure the attainment of price stability objectives.

The Press briefing which anchored on Global Developments, inflation, Domestic Economic Developments, Government Fiscal Operations, Monetary and Banking and External Sector Developments was the first MPC meeting chaired and addressed by Dr. Henry Kofi Wampah, in his capacity as the substantive Governor of the Bank.

Dr. Wampah noted that despite some modest gains in economic conditions, vulnerabilities in the global economy, coupled with the weakening of commodity prices on the international markets which has increased the risks to the external outlook will continue.

He announced an improvement in the global economic conditions following the implementations of various policy measures that successfully contained the threat of the Euro area breakup as well as fiscal conditions in the United States.

Overall global growth according to him remain constrained, leading to downward revisions of end year output forecasts from 3.5% to 3.3% in April 2013. He however disclosed that growth is at a multi-speed mode with emerging and developing nations expected to drive the growth at 5.3 % whiles the USA is expected to grow at 1.9% with the Euro area contracting by 0.3 percent.

Headline inflation for April 2013 was 10.6 percent, up from 10.4 percent in March and 8.8 percent in January. He attributed the upward inflation movement to the continued effect of the upward adjustment of petroleum prices in February, coupled with seasonal effects.

Food inflation rose to 6.4 percent in April from 3.5 percent in January while non-food inflation edged up to 13.0 percent from 11.5 percent within the same period, Dr. Wampah explained.

The BOG Chief pointed out that provisional estimates on broad fiscal data showed that for the first four months of 2013, Governments fiscal deficit was equivalent to 3.8% of GDP, against a target of 3 percent, an outrun which he added was on the back of a significant shortfall in revenues with expenditures marginally below target.

Touching on the Monetary and Banking Sector Developments in the country, Dr. Wampah observed that the Bank's latest credit conditions survey showed a general net tightening of credit conditions. With the exception of consumer credit which saw some easing, the credit stance for all other loan types including Small, Medium and large Enterprises, short and long term loans were tightened in the period.

On the growth outlook, the Committee noted risks emanating from lower commodity prices, energy sector challenges, weakened business and consumer confidence and tightened credit stance, he stated.

''We as a Committee held the view that risks to inflation outlook were elevated and outweighed the risks to growth and therefore decided to increase the policy rate to 16 percent'' he announced.

The BOG Boss further announced that in addition to the policy rate increase, the Bank has recently introduced changes to its monetary operations by realigning the policy corridor by widening the band.'' The reverse repo rate is now 200 basis points above the policy rate while the repo rate is at 100 basis point below it''.

The Central Bank also changed its presence mode in the interbank market by introducing an '' informal standing facility'' to operationalize its policy decisions and enhance the transmission mechanism.

'' These changes have steered the interbank rate within the policy corridor as it is expected that the treasury bill rates fall within the corridor when Government restructures its debt and consolidate its fiscal operations''.

He promised that the policy measures introduced by the Bank in May 2012 with regards to cash reserve requirements, net open position limits and balances will continue to be in place.

To ensure transparency in the pricing of credit in the Ghanaian banking system, the Bank of Ghana Governor, who doubles as the MPC Chairman, announced that the Base Rate Formula will be implemented by all banks with effect from 2nd July 2013.