Ghana Holds Rate for 4th Meeting Even as Inflation Is Muted

(Bloomberg) -- Ghana’s central bank held its benchmark interest rate for a fourth consecutive time even as new data show inflation is below the midpoint of its target range.

The Monetary Policy Committee kept the rate at 16%, Governor Ernest Addison told reporters Friday in the capital, Accra. That was in line with the forecast of all but one of the five economists surveyed by Bloomberg.

While a new base year for Ghana’s consumer-price index showed that annual inflation was 7.8% in August, below the midpoint of the 6% to 10% target, underlying price growth was accelerating, said Addison. The old rate reported for July was 9.4%.

“The pace of disinflation has slowed somewhat” due to rising fuel costs and utility fees, he said. “The second-round effects of these measures will have to be monitored closely.”

Key Insights

• Apart from core inflation, the Bank of Ghana remains concerned about the budget deficit, which was 3.9% of gross domestic product on a cash basis in July against a forecast of 3.2%, largely because of missed revenue targets.
• Repeating a comment he made in January, Addison said Ghana should consider a lower inflation target to match those of the country’s major trading partners.
• He didn’t elaborate further on what an “optimal inflation target” should be.
• Economic growth in Africa’s largest gold producer slowed to 5.7% in the second quarter, the lowest rate in a year.

To contact the reporter on this story: Ekow Dontoh in Accra at edontoh@bloomberg.net

To contact the editors responsible for this story: Andre Janse van Vuuren at ajansevanvuu@bloomberg.net, Gordon Bell

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