BoG maintains policy rate at 13.5%
The Monetary Policy Committee (MPC) of the Bank of Ghana maintained its policy rate at 13.5% at its last meeting for 2010. The MPC has the mandate to review the economy on a quarterly basis and set a rate at which commercial banks can borrow from the central bank. At its meeting in December, the MPC set its policy rate to reflect developments in the economy for the first nine months of 2010, factoring in risks in the outlook for inflation.
The decision was also influenced by the recovery in economic activity and the counter-balancing effects of the risks in the outlook. The macroeconomic policy mix over the past year sustained the process of disinflation, as the inflation rate slowed down considerably from January to December. Looking ahead into 2011, the MPC expects inflation to go below 9%.
The Business and Consumer Confidence Survey conducted by the Bank of Ghana to gauge confidence in the economy showed that both consumer and business sentiments have improved, with a much stronger rebound by consumers.
According to the survey findings, businesses have expressed optimism regarding capital expenditures, and sales and level of profits, but were less optimistic about employment prospects.
The interbank overnight rate, which is the rate at which commercial banks borrow from each other, fell from 12.3% to 11.6% in 2010. However, the Bank of Ghana noted that credit to the private sector still remained weak and wants banks to further ease credit conditions to allow business activity to pick up much faster.