“The outlook for inflation is broadly positive as reflected in the continued decline in the underlying inflation, stability in the foreign exchange market, low aggregate demand conditions and general high real interest rates,” the Central Bank Governor, Abdul-Nashiru Issahaku, said at a press conference. 

However, he said, growth conditions remained weak and below trend underpinned by weak global demand, declining commodity prices and disruptions in the production of oil and gas. Other factors include weak private sector credit growth as a result of the tight credit stance and fiscal consolidation efforts. These tight conditions are expected to prevail in the outlook.   

“With these considerations, the Committee concluded that the downside risks to growth outweigh the risks to inflation and, therefore, decided to reduce the Policy Rate by 50 basis points to 25.5 per cent,” he said.

Dr Issahaku said the inflation outlook remains positive and barring any major price shocks, the forecast remains broadly unchanged and inflation is expected to return to the medium-term target band in 2017.

Headline inflation has gradually trended downwards in the year after peaking at 19.2 per cent in March 2016. It fell sharply to 15.8 per cent in October from 17.2 per cent in September. Similarly, the Bank's main measure of core inflation (CPI inflation excluding energy and utility prices) which measures underlying inflation, continued on its descent, declining from 16.9 per cent in September to 15.2 per cent in October.

Dr Issahaku said the current tight policy stance and exchange rate stability should further support the disinflation process.   On government fiscal operations in the year to September, Dr Issahaku said provisional data showed a budget deficit of 5.9 per cent of Gross Domestic Product (GDP), compared with a target of 3.9 per cent of GDP.

He said the higher than programmed deficit was mainly due to lower revenues arising from significant shortfalls in oil revenues, while expenditures were broadly on track. “The fiscal outlook hinges on strengthening revenue mobilisation and sustained efforts at containing expenditures,” he said.  The governor said the external sector performance remained strong as data showed significant improvement in the external trade deficit in the year to September, relative to 2015.

This improvement was on account of higher export receipts, mainly from gold, combined with lower imports. The outturn of the trade balance has significantly improved the provisional current account deficit to 3.1 per cent, relative to target 5.0 per cent of GDP.

On the performance of the Ghana cedi, Dr Issahaku said the outlook for the exchange rate remains positive and the Committee was optimistic that the stability of the cedi would be sustained. The Ghana cedi cumulatively depreciated by 4.3 per cent against the US dollar between January and October 2016, compared with cumulative depreciation of 15.5 per cent in the same period last year.