The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has maintained its policy rate on 16% for second time this year.
The committee maintained the rate based on a number of factors including, reduction in foreign exchange volatility, risks posed by external shocks on domestic economy, and forecast inflationary pressures.
The Governor of BoG, Dr. Henry Kofi Wampah explained to journalists in Accra yesterday that "global economic conditions remain mixed as recovery in advanced economies continues to be countered by a slowdown in emerging markets".
These together with trends in commodity prices continue to pose significant risks to the external outlook with direct implications for the domestic economy, he added.
The external sector was partly affected by the recent developments on the global front, especially with weak commodity prices in the first half and a slowdown in portfolio inflows.
Dr. Wampah was quick to say: "Although the overall impact has been muted by slower growth in imports and significant improvements in the capital and financial accounts, risks to the outlook continue to emanate from uncertainties in the global financial markets"
The volatility in the foreign exchange market has reduced significantly this year. Going forward to the end of the year, it is expected that pressures in the foreign exchange markets would ease further with the impending inflows of the cocoa syndication loan and the Multi Donor Budget Support (MDBS) disbursements, subject to seasonal demand pressures, he told the journalists.
Furthermore, Dr Wampah who chairs the MPC noted that the implementation of the budget for the first seven months of the year revealed that fiscal pressures still persist arising mainly from significant shortfalls in domestic revenue collections and the delay in the removal of utility subsidies.
On the outlook for inflation, the Committee noted that even though inflation had declined in August, upside risks remained.
In particular, there has been further adjustment in petroleum prices and transport fares in September. There is also the possibility of adjustment of utility tariffs in the fourth quarter.
The uncertainty in commodity prices also poses risks to inflation.
These risks could however be moderated by an improved harvest, relative stability in the foreign exchange market supported by the syndicated cocoa loan, and subdued global inflation.
The Committee noted that although the inflation forecast has improved at this MPC round, the central path remains slightly above the upper limit of the target band. Barring any shocks, inflation could move back to the target range by the first half of 2014.
On the growth outlook, the Committee observed that economic activity had picked up, evidenced by positive developments in the Bank's Composite Index of Economic Activity (CIEA) and the credit stance of DMBs as well as increased oil production.
However, the downside risks include budgetary cutbacks in domestic financed capital expenditures and spending on goods and services in favour of recurrent expenditures such as wages and salaries. Softening consumer sentiments may also pose a downside risk to the growth outlook, according to the committee.