The Bank of Ghana has rescheduled the commencement of the 100^th Monetary Policy Committee (MPC) meetings to May 26 – 28, 2021. As such, the press conference will now take place on Monday, May 31, 2021 to decide the fate of the policy rate.

However, the MPC Meetings were originally slated for May 19 – 21, 2021. The MPC meets every two months to review development in the Ghanaian economy and then concludes with a press conference.

Currently, the Bank of Ghana has pegged the policy rate at 14.5% since March last year. As such, it is not clear whether the Bank will make any changes to the rate as of now. But, before the Bank takes any decision, it will consider the performance of certain key macroeconomic indicators. These indicators among others include inflation, inflationary expectations, exchange rate movements, and the level of economic activities.

Key macroeconomic indicators

Presently, inflation has eased gradually to single digits at End-April 2021. It now stands at 8.5%, declining from 10.3% in March 2021. Meanwhile, data from the Ghana Statistical service show that inflation averaged 10.2% in the first quarter of 2021. This is higher than the 10.1% recorded in Q4 2020 but lower than the 11.0% and 10.8% recorded in Q2 and Q3 2020 respectively.

Nevertheless, the current easing of inflation is partly a reflection of the price hikes witnessed exactly a year ago. Inflation was 10.6% in April 2020. As a result, it fed into the figure recorded in the corresponding month this year when computed on a year-on-year basis.

This is because the pandemic and its containment measures have had a significant impact on the prices of goods and services in the country. In 2020, inflation spiked from single to double digits, peaking at 11.4 percent in July 2020. However, this was mainly as a result of the rise in food prices due to the lockdown measures. It however, eased to 10.4% in December 2020.

Even though it’s still early days, the reduction in inflation may feature predominantly in the MPC discussions. For April 2021, it is ideal for the Central Bank to focus on the month-on-month inflation rate. Apparently, we witnessed a rise in month-on-month inflation from 0.9% in March to 1.5% April 2021.

Other indicators

Earlier this week, the First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari revealed that there is improvement in some of the macroeconomic indicators. He stated that business and consumer confidence have bounced back and the exchange rate remains relatively stable. Moreover, he disclosed that the Bank’s high frequency indicators have rebounded to near pre-pandemic levels.

With almost all indicators picking up beyond their pre-pandemic levels, it is very much likely that the Central Bank may decide to maintain the policy rate. This, is more especially so, because of foreign investors’ holding of government’s bonds. A reduction in the policy rate may not encourage such investors to hold the country’s bonds. Also, price expectations are a bit low coupled with the government’s plans to administer the second dose of the vaccines.