The Bank of Ghana has announced it will maintain the benchmark interest rate at 29% for the third consecutive time to rein in rising inflation.
Governor Ernest Addison highlighted the uncertainty surrounding the inflation outlook due to recent exchange rate pressures and rising utility tariffs.
Despite a slight slowdown in annual inflation to 22.8% in June from 23.1% in May, the rate remains significantly above the central bank’s target range of 10%.
This persistent inflation is exacerbated by the cedi’s depreciation, which has reached a record low of 15.5000 per dollar.
The cedi’s weakness is primarily driven by increased dollar demand for imports and a sharp decline in cocoa earnings, a crucial export commodity.
Ghana, the world’s second-largest cocoa producer, has seen revenue from cocoa exports plummet by 48% to $760 million in the first half of the year.
Adverse weather conditions and crop diseases have severely impacted production.
The decision to maintain the current rate reflects the bank’s cautious approach to navigating economic uncertainties.
“The risks are tilted slightly to the upside,” Governor Addison remarked, indicating a vigilant stance towards potential inflationary trends.
With the cedi losing over 5% of its value against the dollar since the last rate decision, the Bank of Ghana is keenly aware of the need to stabilize the currency while addressing inflation.
As the global economic landscape remains volatile, the central bank is expected to monitor developments closely, ready to adjust monetary policy as necessary.
This steadfast approach aims to provide some stability in the face of economic pressures, with hopes that external factors such as improved cocoa output and favorable weather conditions might offer some relief in the coming months.
