Economist and Lecturer at the University of Ghana, Dr Lord Mensah has lauded the central bank for maintaining the Policy Rate.

According to him, maintaining the policy rate was in line with current economic trends and a way of checking inflation which upsurged by 0.2 per cent to 10 per cent in the month of June 2018.

Speaking to Joy Business, Dr Mensah said, the increase in personal income tax and separating of NHIS and GETFUND from VAT might be the main indicators for the MPC decision.

“If you look at the budget that was presented, with the new arrangements and introduction of the budget here and there, which is likely to have an impact on prices and bring some inflation uncertainty in the economy. This means that if they should reduce the monetary policy rate, then obviously, in the long run, it might affect us.”

“Therefore keeping it at 17%, gives an idea of the monetary policy committee itself not sure of what will be the impact of these taxes on the economy. Remember the policy rate is set as an inflation targeting mechanism which means if there are any doubts, there is no way the policy rate will be reduced,” Dr Lord Mensah added.

His remarks come after the Monetary Policy Committee of the Bank of Ghana kept its benchmark interest rate unchanged at 17 per cent, citing short-term pressure on emerging economies.

Speaking to the Press in Accra, after the MPC concluded its meetings, the governor of the central bank Dr Ernest Addison said given the circumstances, especially with regards to the global outlook the policy rate had to be maintained. 

He said, “Headline and core inflation have trended up in recent months although inflation expectations remain broadly well-anchored. The medium-term forecast has remained broadly unchanged and suggests a gradual return to the central path over the horizon.”

Dr Addison added, “Given the circumstances, especially with regards to the global outlook, the Committee decided to maintain the Monetary Policy Rate at 17.0 per cent while closely monitoring developments in the near-term. The Committee stands ready to take the appropriate policy measures to promptly address any potential threats to the disinflation path.”

He said, “in assessing the balance of risks, the Committee was of the view that although inflation had moved upwards in the recent readings, this came mainly from the effects of increases in administered prices of petroleum and transportation costs. 

The Committee viewed that second round effects from these relative price changes would not be significant enough to alter the inflation trajectory over the medium-term. 

This would require continued fiscal consolidation together with a tight monetary policy to keep inflation within the target band.”

The inflation rate for June 2018 went up to 10 per cent as a result of increases in prices of non-food items in the country as a figure from the Ghana Statistical Services showed an increase of 0.2 per cent as compared to the 9.8% recorded in May 2018.

Food and Non-alcoholic beverages group recorded a year-on-year inflation rate of 7.3 per cent. This is 0.3 percentage point lower than the rate recorded in May 2018, with the non-food group recording a year-on-year inflation rate of 11.2% in June 2018, compared to the 10.9 per cent recorded for May 2018. 

Five subgroups recorded year-on-year inflation rates higher than the group’s average rate of 11.2%.