The Monetary Policy Committee (MPC) has maintained its policy rate at 13.5 per cent, citing strong revenue mobilisation, the pick-up in economic activity and improved fiscal situation at the beginning of 2011.
Mr Kwesi Amissah-Arthur, Central Bank Governor, announced the decision at a press conference in Accra on Friday.
He said while the Committee recognised improved fiscal situation at the beginning of 2011 with improvements in revenue mobilisation and the settlement of statutory arrears, some concern remained about the sustainability of expenditure management.
Besides, developments in energy, food prices and the geo-political developments in North Africa and the Middle East pose a threat to the inflation outlook.
The Committee reviewed global economic developments in 2010, the outlook for 2011 while review on the domestic economy examined factors underlying inflation conditions, implementation of the 2010 Budget, the growth outcome for 2010 and prospects for 2011.
In addition, the Committee assessed developments in the financial system, the external sector and evaluated results of the business and consumer confidence surveys conducted in January 2011.
Mr Amissah-Arthur said the forecast for inflation though slightly elevated, was expected to remain within the target band of 8.5 per cent, +/- 2 per cent by the end of 2011.
Inflation picked up to 9.1 per cent in January 2011, mainly on account of the increase in the prices of petroleum products.
“Of the 12 components in the consumer basket, the transportation sector recorded a significant jump in prices from 2.6 per cent in December 2010 to 19.4 per cent in January 2011 and this was the main driver of the rise in overall inflation,” the Governor said.
He said the Bank of Ghana Composite Index of Economic Activity registered a growth of 10.5 per cent in 2010 compared to 9.6 per cent in 2009.
Commercial Banks Credit to the private sector, industrial activity, level of imports, construction sector activity, tourist arrivals, social security contribution, sales of key manufacturing establishments and port and harbour activity are some of the sectors that contributed to the increase in the index relative to the pace observed a year ago.
On the other hand, Consumer and Business sentiments moved in opposite directions in the latest survey conducted in January 2011.
While that for consumers declined, business confidence improved.
The survey suggests that the reduction in consumer confidence can be attributed to increased crude oil prices and the immediate impact of the recently petroleum price hike.
However, optimism about general economic prospects, realisation of expectations and companies’ prospects contributed significantly to the positive assessment of businesses, the Governor said.