BoG holds benchmark policy rate at 22.0 pct

The Bank of Ghana's Monetary Policy Committee (MPC) kept its main policy rate unchanged at 22.0 percent as expected on Wednesday, citing improvement in the West African nation's inflation outlook as the local cedi currency rallies.

The cocoa- and oil-producing country is under a three-year aid program worth $918 million with the International Monetary Fund (IMF) to restore fiscal balance to an economy dogged by a deficit, a debt-to-GDP level close to 70 percent and rising inflation.

The bank raised the policy rate in May by 100 basis points in a consistent monetary tightening stance to curb inflation while maintaining growth as the country's macro-economic position has deteriorated.

Governor Henry Kofi Wampah said the committee observed that although inflation expectations were still elevated, the pressures in the outlook for the medium-term were waning.

"This is as a result of the tight monetary policy stance, continuing fiscal consolidation and the recent recovery of the cedi," Wampah said.

The cedi was trading at 3.31 to the dollar at midday on Wednesday, its highest rally since January.

Ghana's monetary policy mainly targets inflation and analysts had expected the central bank to hold the rate.

Annual consumer price inflation GHCPIY=ECI rose to 17.1 percent in June from 16.9 percent the previous month triggered by the depreciation of the cedi and higher transportation costs, the statistics office said on Wednesday.

Ghana enjoyed years of sustained growth at around 8 percent on the back of its exports, but the economy has suffered because of the fiscal crisis and a fall in commodity prices.

In order to improve liquidity in the foreign exchange market, the Bank confirmed that it would open two-year domestic debt auctions to foreign investors, as Reuters had previously reported.

Wampah also said the MPC had asked the Bank of Ghana to introduce additional measures to streamline monetary operations. This will include merging the monetary policy rate with the reverse repo rate within 30 days to improve transmission mechanism.

It added that the merger of the rate would be immediately followed by the introduction of a 7-day reverse repo instrument in the money market to offer more flexibility in the liquidity management of banks.