Prime rate to remain unchanged
Masahudu Ankiilu Kunateh, Ghanadot
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG)
has decided to leave the prime rate unchanged at 18.5%.
The prime rate is the rate at which the central bank does its
overnight lending to the universal banks in the country.
Announcing this at a press conference in Accra yesterday, the
Governor of the Bank of Ghana, Dr. Paul Acquah, who is also the
Head of the MPC, explained that the indicators of the economic
activity and demand growth including imports seemed to be
slowing down from the rapid pace recorded in 2008.
Similarly, headline inflation though still high seem to be
stabilizing with reduce price volatility observed over the past
few months, as has exchange rate volatility in the midst of
sharp swings in international currencies.
The Governor observed that headline inflation for March 2009
released by the Ghana Statistical Service (GSS) recorded 20.5%
up from 20.3% in February and 19.9% in January, this year.
During this period, non-food inflation pressures had been
strong, while food inflation fell from 19.4% in January to 18.5%
in March, however, non-food inflation increased from 20.2% to
22.0%, in part due to the strong pass-through from exchange rate
depreciation to domestic prices.
He added that the bank’s measure of core inflation (defined to
exclude energy and utility) increased from 13.9% in December
2008 to 19.3% in March 2009, though the rate of monthly increase
indicates some slowdown.
Dr. Acquah noted that there were relatively sharp movements in
the exchange rate of the cedi against the three core currencies
namely, the US Dollar, Pound Sterling and the Euro during the
first quarter of this year.
The cedi depreciated cumulatively by 13% against the dollar,
9.9% against the Pound Sterling, and 6.6% against the Euro In
year-on-year terms, the comparable depreciations were 0.8%, 1.1%
and 7.3% respectively against the three core currencies.
He was quick to add that the rate of depreciation declined
rather in April, this year with reduced volatility observed in
the exchange market.
Additionally, provisional data available at the end of March
2009 show some easing in the pace of expansion of the key
monetary aggregates. Broad Money (M2+) grew by 37.8% in the year
ending March 2009, compared with 39.2% for the same period last
Deposit Money Banks (DMBs) interest rates broadly followed the
trend in the policy rate. As average base rate quotations of the
banks were revised upward by 170 base points to 28.92% in the
first quarter of 2009 and were in the range of 25.5%-32.0%, in
addition to 65 basis points revision in the fourth quarter of
Similarly, average lending rates also rose by 400 basis points
in the first quarter of 2009 to 31.25%, and were within the
range of 25.5% to 37.0%.
Reviewing the performance of the first quarter of 2009, Dr.
Acquah disclosed that the Bank’s Composite Index of Economic
Activity (CIEA) showed that the level of economy activity picked
up marginally over the level recorded in December 2008.
In year-on-year terms, the index grew by 17.0%, below the trend
growth rate of 22.6%, and compared with 30.2% and 20.8% recorded
for the same period in 2008 and 2007 respectively.
Whilst in real terms, the index grew by 2.2% compared with 19.6%
and 9.7% respectively for 2008 and 2007. This is against the
backdrop of 2008 Gross Domestic Product (GDP) growth rate of
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Accra, May 12, Ghanadot - The Monetary Policy Committee (MPC)
of the Bank of Ghana (BoG) has decided to leave the prime rate
unchanged at 18.5.....The prime rate is the rate at which the
central bank does its overnight lending to the universal banks
in the country. ....More