Monday, 22 January 2018
BoG maintains 8±2% inflation target for 2018

BoG maintains 8±2% inflation target for 2018

By Augustine Amoah

The Bank of Ghana (BoG) has maintained an inflation rate of 8±2 percent for this year.

This suggests that interest rates on the yield curve and lending rates will continue to fall.
According to its latest Monetary Policy Report, continued improvement on the global economic front including stability in the foreign exchange market and achievement of the medium term fiscal targets would reinforce this outcome.
The report added that “the risks to the inflation outlook are largely muted at this stage and may continue as the macroeconomic fundamentals continue to improve in the periods ahead. However, some upside risks to the inflation outlook could emerge from rising crude oil prices and tightening global financing conditions.”
On downside risks, the report added that the downward trend in core inflation and continued fiscal consolidation are supportive of the disinflation process.
Also, the proposed electricity tariff reforms are expected to feed into lower cost of production while government’s commitment towards improving the agriculture sector with policy initiatives could translate into lower food prices going forward and support the disinflation process.
The Central Bank explained that in the first 10 months of 2017, the fiscal consolidation was on course, and staying the path would dampen aggregate demand pressures and support the disinflation process.
It however noted that though overall growth has gathered some momentum, non-oil growth remains modest requiring some additional impetus.
The Monetary Policy Committee of the BoG earlier acknowledged that continued improvement in the global economic environment including oil price changes, stability in the foreign exchange market, and achieving the medium-term fiscal targets are key to steering inflation to the medium-term target band of 8±2 percent.
Inflation inched up to 11.7 percent in November 2017 from 11.6 percent in October 2017, albeit remaining relatively stable throughout the year. On the other hand, annual average inflation fell from 13.0 percent in October to 12.7 percent in November.
Focus Economics Consensus Forecast panelists expect inflation to average 10.5 percent in 2018, which is down 0.1 percentage points from last month’s forecast, and 9.5 percent in 2019.

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