The Central Bank has kept its Monetary Policy Rate unchanged at 16 percent in a bid to stabilize the cedi from depreciation.
According to the Governor of the bank, the economy presents a fairly resilient and robust performance with regards to output growth and a strong trade and payments position.
Adding that the economy is positioned firmly on the path of stability with inflation forecasted to stay within the medium term target band of 8±2 percent, barring any unanticipated shocks.
"Under these circumstances, the Monetary Policy Committee viewed the risks of inflation and growth outlook as broadly balanced, and therefore decided to keep the Monetary Policy Rate unchanged at 16 percent, while standing ready to decisive policy actions when necessary to ensure that inflation remains within the target band," Governor Ernest Addison said at news conference on Friday, January 31.
As of December 2019, inflation was pegged at 7.9 percent after dropping from 8.2 percent in the previous month November leaving the policy rate at 16 percent.
Meanwhile, at the end of the third quarter of 2019, the cedi had depreciated by 13 percent against the US dollar.
Earlier, the International Monetary Fund (IMF) had warned that any further reduction of the current BoG Policy Rate will spell doom for the local currency which is facing depreciation against the major trading currencies.
"Inflation expectations remain aligned with the central bank’s target and short term real rates are above the historical average. This context suggests that the current policy rate is appropriate. The MPC should remain cautious as inflationary pressures could re-emerge and a relatively tight stance may help stabilize the exchange rate and reduce FX interventions,” the IMF said in a statement.