At the September meeting, the Monetary Policy Committee of the Bank of Ghana decided to keep the monetary policy rate at 26 per cent, and affirmed its commitment to take any necessary policy action to bring inflation back within the medium-term target band of 8±2 per cent by mid-2017.
The decision of maintaining the policy rate reflects the September forecast which also assessed new available data on some economic indicators. The underlying assumptions for the forecast were:
Widening negative output gap after adjusting for the revised GDP forecast for 2016 [expected to dampen inflation pressures through weaker aggregate demand];
Slightly overvalued local currency (in real terms) [to support disinflation process];
Marginal narrowing of the inflation gap after adjusting for the sharp decline in the July inflation numbers;
Tight fiscal stance over the forecast horizon [expected to lower inflation pressures on the back of weaker aggregate demand];
Improvement in risk premiums as sovereign spreads moderate; and
Weak foreign demand with low foreign inflation and interest rates pointing to downside risks from the global economy.
