Prime rate likely to remain unchanged again

…as inflation drops in January

As the Monetary Policy Committee (MPC) of the Bank of Ghana begins its meeting on Monday, the expectations of the business community are that prime rate is most likely to remain unchanged at 21 percent.

Thankfully, signals are positive for the MPC to maintain the Bank of Ghana’s (BoG’s) prime rate as inflation drops to begin the year.

Headline inflation dropped to 16.4 percent in January from 17.0 percent in December 2014, representing a decline of 0.6 percentage points. 

Consumer inflation rate increased for the 14th consecutive month to 16.9 percent in October 2014 from 16.5 percent the previous month. The November same-year figure was maintained at 16.9 and increased to 17.0 in December to end the year.

Government is looking to reduce inflation to about 11.5 percent by the end of 2015, as announced by the Finance Minister Seth Terkper in the 2015 budget statement presented to Parliament in November 2014. 

Mr. Baah Wadieh, Deputy Government Statistician, briefing the media in Accra attributed the decline in current inflation rate to stable food prices and the drop in oil prices.

“The source of the easing is largely the stability in food prices that we have seen in recent months, supported by the decrease in oil prices," deputy government statistician Baah Wadieh told a news conference.

“This means that the change in general price level went up by 3.4% between December 2014 and January 2015,”he explained.

The government expects to secure a deal with the International Monetary Fund by the end of March for around US$1billion in financial assistance aimed at stabilising inflation, reducing the deficit, and restoring economic stability.

The government decreased oil prices by 10 percent in January to reflect a global slump in fuel prices.

Mr. Wadieh said the food inflation rate for January 2015 was 6.9 percent compared with 6.8 percent recorded in December 2014.

The non-food inflation rate for January 2015 was 23.0 percent, down from the 23.9 percent recorded in December 2014.

“The year-on-year non-food inflation rate is more than three times higher than the food inflation rate,” Mr. Wadieh said, adding that the inflation rate for imported items, which was 23.2 percent, is more than one and half times higher than the inflation rate for locally produced items at 13.9 percent.

Mineral water, soft drinks and fruit recorded the highest inflation in the food group at 16.7 percent. Housing, water, electricity, gas and other fuels saw inflation of 32.3 percent, Wadieh said.