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BoG cautiously optimistic about curbing inflation

May 17, 2016, 10 a.m.

Governor of the Bank of Ghana (BoG), Dr Abdul-Nashiru Issahaku has defended the bank's monetary policy stance

, saying “our forecasts on inflation are working and there are early signs of progress." 

In his first media briefing on the outcome of the bank's Monetary Policy Committee (MPC) meeting yesterday, Dr Issahaku said the committee viewed the current monetary policy stance as appropriate since inflation levels remain above the medium term target band.

"Recent developments in prices remain in line with our earlier forecasts that inflation will peak in the first quarter of 2016 and decline thereafter, supported by continued policy tightness and stability in the local currency," the Governor observed.

Citing the return of inflation to "a declining path," from 18.5% in February and 19.2% in January this year, the BoG maintained its policy rate at 26%.

 Dr Issahaku was confident that the tight policy stance and stability on the foreign exchange market, alongside easing inflation expectations, should provide additional momentum to the disinflation process. 

The Governor said even though the bank trusted its inflation-targeting model, it was cautious of risks to efforts at reducing inflation.

"The slow but persistent pickup in food inflation since August 2014, coupled with unanticipated upward adjustment in utilities and petroleum product prices and possible second-round effects from such adjustments in prices, are major sources of concern for inflation," Dr Issahaku stated.

Responding to queries about what industry has described as unduly high interest rates, the Governor explained that the root of the high interest rates was high inflation. He justified the efforts of the bank to "pull down inflation to acceptable levels so that interest rates will come along with it."

Speaking with The Finder after the briefing, banking consultant, Nana Otu Acheampong said the policy rate was still too high.

"Even though it is better it was maintained at 26%, it is still too high; it is impacting negatively on businesses all over the country," he noted.