Inflation down at 10.8%

..Prime rate maintained at 14.5%
Accra, Oct. 16, GNA - The Monetary Policy Committee (MPC) of the Bank of Ghana (BOG) on Monday maintained the prime rate at 14.5 per cent despite downward turn in headline inflation driven mainly by favourable food supply and an ease in non-food prices.

Addressing the media on MPC's assessment of the economic development over the past nine months, Dr Paul Acquah, Governor of BoG, said with three consecutive months of increases in headline inflation, which pushed the rate to 11.4 per cent, inflation fell marginally to 11.2 per cent in August 2006.


He said the Ghana Statistical Service has updated the BoG that the headline inflation figure further dropped to 10.8 per cent in September 2006.


Dr Acquah said this gave an indication that the "pass-through effects" of petroleum prices were ending although they still left some lingering impact on consumer confidence.


He said all the Bank's measures of core inflation also showed some easing in underlying inflation and a return to the path of convergence towards a low inflation path.


"The prospects are thus better that GDP growth could rise to some 6.0 per cent in 2006 with the economy firmly anchored on the path towards single-digit inflation and growth," the Governor said. Economic activity measured by the BoG indicators, he said, showed a robust pace driven by exports and domestic demand whereas external payments position exhibited resilience, even under pressure from highly volatile and rising oil prices.

The Bank's Composite Index of Economic Activity increased by 10.6 per cent in real terms, which was above the trend growth rate of 9.9 per cent.


The BoG's Ghana Surveys of Business and Consumer Confidence also indicated that business and consumer confidence on macroeconomic developments and outlook continued to be strong.


Both current and capital accounts on the balance of payment recorded surpluses of 61.41 million dollars and 13.14 million dollars, respectively compared with deficits recorded in 2005. Dr Acquah said the period saw a sustained growth in credit of about 21,262.3 billion cedis, an increase of 29.1 per cent, to private sector and public institutions.


"In real terms credit to the private sector increased by 20.1 per cent in August 2006 compared with 18.1 per cent in for the same period in 2005," he said.


Monetary growth, the Governor said, remained in line with underlying trends in the economy close to targets.

"Reserve money growth, which had slowed down in the economy in the first half of the year, picked up by 3.2 per cent in the third quarter, with an annual growth reaching 16.7 per cent at the end of September." The financial system, Dr Acquah said, also recorded increased level of capital adequacy, liquidity and improved portfolio quality. Total banking system assets grew by 33.4 per cent to 43,653.0 billion cedis at the end of August compared with a growth rate of 13.6 per cent for the same period in 2005.


The share of rural banks' assets in the entire banking system increased further to 5.67 per cent in June 2006 from 5.56 per cent in the same period in 2005.


In the foreign exchange market, the Governor said there was a significant increase in depth and active inter-bank trading as purchases and sales of foreign exchange by banks and forex bureaux increased by 14.4 per cent to 4.26 billion dollars over the period.


The cedi, he said, continued to trade within a narrow range vis-=E0-vis the dollar into the third quarter but depreciated cumulatively against the other core currencies such the Pound Sterling and the Euro by 10.0 per cent and 8.5 per cent, respectively. 16 Oct. 06