The Bank of Ghana left its key policy rate unchanged at 16% despite rising inflation, saying that inflation risks are mainly structural and might not need to be addressed by a policy rate adjustment for the time being. It also said there are no significant risks to the country’s economic growth.
The bank said that leaving rates on hold posed no significant risk to economic growth, which is forecast to reach 8% in 2014. It also said that the headline inflation will most likely breach the 2013 target of 11.0%, but will track back to the target range of 9.5% plus or minus 2pps.
The Bank of Ghana said the major upside risks to the inflation outlook include further petroleum price adjustments, possible adjustment of utility tariffs, and pressures arising from the budget overruns, and exchange rate pressures.
The local currency experienced a relatively slower depreciation against the USD compared to the same period last year. However, the central bank committee noted that the foreign exchange markets were vulnerable and would need additional measures that should help increase transparency in the markets.
The Bank of Ghana said that prospects for growth have improved in the third quarter as evidenced in its Composite Index of Economic Activity (CIEA). It expects an improvement in energy supply and increased oil production to provide a further support to the economy.
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