by Justice Lee Adoboe
ACCRA, May 22 (Xinhua) -- The central bank of Ghana announced Monday a 100 basis point reduction in its benchmark policy rate to 22.5 percent from the previous 23.5 percent, after a 200 basis point slash in March.
This second successive slash in the policy rate this year, according to Bank of Ghana governor Ernest Addison, is due to the evidence that the economic imbalance that existed at the end of 2016 is giving way to stronger fundamentals.
"Given these considerations, the Committee judged that the downside risks to growth outweigh the upside risks to inflation in the outlook," Addison said.
The reduction in the fiscal deficit for the year, according to the governor, is expected to foster more stable macroeconomic conditions. Rigorous and steadfast implementation of the budget will therefore be critical to the outlook.
"On inflation, the Committee noted that headline inflation and inflation expectations have broadly trended downwards. The disinflation process has been supported by tight policy stance and exchange rate stability," the governor added.
Inflation inched up to 13 percent in April from the 12.8 percent recorded the previous month when the central bank slashed the policy rate by 200 basis points to 23.5 percent.
On economic growth, Addison explained that the pace of economic activity had picked up, driven mainly by growth in private sector credit, improved business sentiments and easing credit stance.
Furthermore, he said the increased oil production from both Jubilee and the Tweneboa-Enyinra-Ntomme (TEN) fields and the coming on stream of further activity in the oil and gas sector from the Sankofa Gyenyame Ntomme (SGN) fields by the third quarter would give added impetus to overall growth prospects.
"With a stable outlook for exchange rate movements and return to the path of fiscal consolidation, headline inflation is expected to trend towards the medium-term target in 2018, barring any unanticipated shocks," Addison added.
