22.03.2005 Business & Finance

Monetary Policy Committee Meeting begins

22.03.2005 LISTEN

Accra, March 22, GNA - The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) on Tuesday began its monthly meeting in Accra with expectations that the Prime Rate might edge up slightly on the back of the recent petroleum products price increases.

The Prime Rate finished at 18.5 per cent at the end January from 12.6 per cent in December 2004.

The increasing price of oil on the international market, currently at about 57 dollars a barrel, is constantly putting intense pressure on the management of foreign exchange reserves of the Central Bank.

Industry analysts in an interview with the Ghana News Agency Business Desk on Tuesday noted that the major effect of the fuel price changes slowed down spending over the period. However, expectations of increased food supply and a much stable foreign exchange atmosphere could ease inflationary trends, they said.

There is an outlook for continued convergence toward low stable inflation, increased GDP growth and closing the output and employment gaps amidst a strong external payments position.

BoG sources said fiscal and monetary policy mix for this year implied a downward effect on the growth of the monetary aggregates. The sources said they were optimistic that there would be stabilization or further decline of reserve money as it did from the 18.8 per cent of December 2004 compared to the 33.4 per cent of the same period in the previous year.

The foreign exchange market would continue to be firm with a further increase in transactions, a manifestation of the low spending power and a heightened volume of remittances by relatives and friends abroad. Private inward remittances for the period up to November last year were 2,654 million dollars.

"The Cedi is expected to remain relatively stable but is sure to lose some grounds against the Euro and the Pound Sterling."

The nominal rate of depreciation last year against the dollar, British Pound and Euro on the inter-bank market was 2.2 per cent, 13.3 per cent and 12.3 per cent, in that order.