The Monetary Policy Committee (MPC) on Wednesday sent mixed signals about the exact inflation rate for February, saying the exact figure would be known by the end of March.
However, the Governor of Bank of Ghana, Dr Paul Acquah, who is also the Chairman of the MPC, told a Press Conference in Accra that given the balance of risks in the outlook, the MPC had decided to increase the Prime Rate to 27.5 per cent from the previous 24.5 per cent. The Prime Rate is the rate at which the Central Bank lends money to the commercial banks.
Dr Acquah said the increase in prices of petroleum products last January and the resultant unbridled increases in the prices of goods and services "created a storm in the scheme of things".
He said since the last MPC meeting in January, developments in the economy showed clear signs of continued build-up of inflationary pressures.
Annual consumer price inflation as measured by the Consumer Price Index (CPI), turned in at 16.3 per cent in January, edging up from 15.2 recorded in December 2002.
The national CPI recorded an estimated jump of close to 12.8 percentage points in February.
"This was well above normal cost-price adjustment in the markets for goods and services. The data for March should shed light on the extent to which these price changes have become embedded."
Dr Acquah said data for January and February of the current year indicated that the growth of the monetary aggregates was slowing, adding that broad money supply and reserve money both declined relatively faster with the seasonal unwinding of the stock of currency associated with the financing of the cocoa crop.
He said impulses underlying the upturn in the inflation rate since the beginning of the fourth quarter of 2002, were the result of public sector borrowing to meet the demands of the 2002 budget, liquidity injection of currency for purchases of the unexpectedly large 2002-2003 cocoa crop. The country expects a cocoa harvest of some 450,000 tonnes.
"The others are the downward pressures on the exchange rate, growth in domestic liquidity as well as the effect of the sharp depreciation of the US dollar vis-?-vis the Euro and Pound Sterling.
"The underlying consumer price inflation increased considerably in February mainly on the strength of the pass-through effects of the corrective adjustments to fuel prices made in January."
Mr Kaseem Yahaya, Director of Public Affairs, told Journalists after the briefing that the situation was not clear because there was turbulence and imbalance just after the increase in the prices of petroleum products.
"The 29 per cent being quoted as the inflation figure for February could be right but one would realise that the calculations were done during a period of imbalance and turbulence.
"What we have to do is to wait for the Prime Rate and inflation for March. Then we would know if the figure is embedded in it. Indeed we cannot make policy with unusual figures."