The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) is positive about general price levels in the first quarter.In spite of the exposure to the volatile world crude oil prices and the high consumer spending patterns due to the CAN 2008 Tournament, the committee is optimistic that the outcome would not significantly erode expected gains."Given current trends in commodity prices, the stance of macroeconomic policies and the outlook for inflation, the MPC has decided to maintain the BoG prime rate at 13.5 percent, in the statement of Dr. Paul Acquah, Governor of the BoG and Chairman of the MPC at the Committee's press briefing on Monday.This is the first time the Committee has maintained the rate, following a one percentage point increase in November last year.According to the Governor, business and consumer confidence dipped slightly in the last quarter of 2007 but had since shown signs of recovery due to the softening associated with the increases in prices of petroleum related products and utility prices.Prices of domestic petroleum products in the last quarter adjusted on a number of occasions in line with increases in world crude oil prices that hit the US$100.0 per barrel mark before unwinding to US$91.4 currently.Utility tariffs also went up by more than 100 percent in November last year.Headline inflation rose to 12.7 percent in December last year for the third consecutive time after declining to 10.2 percent in September, and according to the Governor "underlining the higher inflation numbers for the fourth quarter is the pass through of crude oil prices to domestic prices and rising food prices and utility tariffs."The Bank's Composite Index of Economic Activity shows that economic activity remained robust. The index rose by 3.9 percent in the fourth quarter last year and by 20.1 percent for the entire year, slightly below the trend growth rate of 21.1 percent.Contributors to the growth rate were exports, electricity consumption, credit to the private sector, increased tourist arrivals, cement sales and VAT collection while the pace of manufacturing and port activities slowed down.Interest rates have remained generally stable, in line with diminishing inflation expectations.The benchmark 91-day treasury bill rate remained unchanged during the first three quarters of 2007 but increased by 80 basis points from 9.8 percent in September to 10.6 percent in December.The 182-day treasury bill rate also inched up marginal from 10.2 percent to 10.8 over the same period.The 2-year fixed note rate remained unchanged after shedding 70 basis points to 12.8 percent in the first quarter of last year while the 3-year fixed rate declined by 90 basis points in September to 12.1 percent in December.The five-year bond rate on the other hand rose by 133 basis, points to 15 percent over the same period.Average base rate quotations of the banks revised upwards by 29 basis points in the last quarter, closing the year within the range 18.0 and 21.5 percent while lending rates revised upwards by nine basis points to close in the same period between 19.9 and 28.0 percent.The cedi depreciated in nominal cumulative terms against all the three core currencies - the US dollar, the pound sterling and the euro.For the entire year last year, the local currency depreciated by 5.0, 6.0 and 17.5 percent against these currencies respectively compared with the depreciation of 1.1, 14.5 and 12.0 percent respectively in 2006."The inflation outlook in the coming months would be shaped by several factors including importantly the execution of government budget for 2008.Close alignment of public spending with the flow of budgetary resources is necessary to minimize the down-side risks," Dr. Paul Acquah stated.Source: B&FT