Policy rate maintained for 6th time at 14.5%

The Bank of Ghana (BoG) has maintained the policy rate at 14.5 per cent for the sixth time.

The Governor of the BoG Dr. Ernest Addison said on Monday, March 22 that the banking sector remains well-positioned to continue with the core objective of financial intermediation to support the ongoing recovery process.

Banks are projected to sustain strong performance under mild to moderate stress conditions. While some of the regulatory reliefs extended to the industry have helped banks’ continued support of the real sector, close monitoring and heightened supervision will be required to address potential vulnerabilities in the industry, as the pandemic lingers.

He added the 2021 budget has set fiscal policy on an adjustment path albeit slower than originally anticipated.

The adjustment for 2021 is expected to be driven, mainly by revenue-enhancing measures, and to a lesser extent, expenditure rationalization due to the need to continue the stimulus programmes.

The Committee assessed achieving the enhanced revenue targets and the heavy reliance on the domestic market as the main risks to the budget.

After declining in January 2021, headline inflation rose in February slightly above the upper band of the medium-term target, driven mainly by non-food prices.

The Bank’s forecast, however, remains broadly unchanged with headline inflation expected to return to the target band in the second quarter of 2021. Risks to inflation in the near-term are broadly balanced, but there are emerging short-term pressures emanating from the rising crude oil prices and the direct and secondary price effects of the revenue measures announced in the 2021 budget. Monetary policy would need to remain vigilant to monitor these risks.

“Under the circumstances, the Committee decided to keep the policy rate at 14.5 percent,” Dr. Addison said.