Bank of Ghana, Dr. Abdul Nashiru Issahaku-Governor of Bank of Ghana.

What, Why & When:
Ghana's central bank has a mandate to pursue "price stability and create an enabling environment for sustainable economic growth in the economy" 1.

Against this backdrop, the Bank of Ghana (BoG) has for the 5th time this year maintained the monetary policy rate at 26%, according to statement following the 19th September Monetary Policy Committee (MPC) meeting 2: The policy rate has been left unchanged since November 2015.

In justifying its decision, the bank explained that the rise in inflation from 16.7% in July to 16.9% in August, was only marginal. Moreover, the MPC envisages continued tightness in monetary and fiscal policy, and relative stability in the foreign exchange market.

N.B: The cedi has enjoyed some stability this year – depreciating by only 4.1% as at mid-September as compared to 15% recorded for the same period last year.

All other things being equal, demand-pull dynamics from the approaching festive season will drag Ghana further still from its medium term goal of single digit inflation 3.

Having said that, three factors militate against a significant uptick in consumer prices: a) fiscal restraint, if it is maintained, and IMF "pressure" makes this more likely, b) an inhospitable private sector credit environment, c) burgeoning foreign exchange stability. On the latter point, progressively higher production from the Jubilee and Tweneboa Enyenra Ntomme (TEN) fields next year, support the outlook further still.

Low-level violence e.g. clashes between rival NDC/NPP 'youth' around polling booths are likely in the run up to polling day (elections are scheduled for 7th December, 2016). However, significant political-risk led disruption of the economic/business life of the country, which would feed through to higher inflation, remains a remote possibility at this stage.

The next MPC meeting is scheduled for November, 2016.


1 https://www.bog.gov.gh/

2 https://www.bog.gov.gh/privatecontent/MPC_Press_Releases/MPC%20Press%20Release%20-%20Sept.%202016.pdf

3 The bank has set a target to drive the inflation rate to single digits in Q4 of 2017

Written by Songhai Advisory Analyst Emmanuel Amoah-Darkwah (Accra) with inputs from Managing Partner Nana Adu Ampofo (London).

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