The Monetary Policy Committee (MPC) has kept the policy rate at 14.5 per cent.
At its meeting on Monday, 27 July 2020, the Committee said The MPC noted that uncertainties in the global economy has increased, although investor uneasiness improved somewhat.
The uncertainty derives from a possibility of a prolonged downturn as countries begin to experience a second wave of COVID-19 infections.
Consequently, the fiscal and monetary stimulus packages will have to be continued over a much-longer horizon, which could lead to a negative spill over to emerging and frontier markets with consequences for weaker growth and instability.
The spill-over of weak global demand conditions on the domestic economy will negatively impact exports, foreign direct investments, remittance flows, and domestic growth conditions.
The most recent data on the Ghanaian economy, according to the central bank, shows that the pandemic has impacted adversely, resulting in a significant growth downturn and higher inflation. All leading indicators of economic activity, international trade, construction, and manufacturing activities declined significantly.
More granular data also show that business and consumer confidence, and private sector credit growth even though declined on a year-on-year basis, is beginning to show some modest gains.
Policy and regulatory measures announced by the MPC in March and May have positioned the banking sector to withstand the shocks associated with the pandemic and to support businesses.
These measures, BoG said, are working their way through the economy, and are beginning to impact positively. So far, new advances for the first half of 2020 was estimated at GH¢15.8 billion compared to GH¢12.1 billion the same period of last year. The central bank will continue to engage the banking industry to provide the necessary support in these challenging times.
“The Committee was of the view that the current extraordinary circumstances, with a widened budget deficit and a residual financing gap, would require some monetary restraint to preserve the anchors of macroeconomic stability. In the circumstances, the Committee decided to maintain the policy rate at 14.5 percent.”