Ghana's central bank held its policy rate steady at 16.0 percent, saying the risks to inflation and growth were balanced with the central path for inflation still above the bank's limit despite a marginal decline in inflation in August.
The Bank of Ghana, which raised rates by 100 basis points in May in response to accelerating inflation, said there had been further rises in petroleum and transport prices this month and there is a possibility of higher utility tariffs in the fourth quarter and commodity prices also pose a risk to inflation.
These upside risks, however, could be moderated by an improved harvest, relative stability in the foreign exchange market and subdued global inflation.
"Barring any shocks, inflation could move back to the target range by the first half of 2014," the central bank said. The bank targets inflation of 9 percent by year-end, plus/minus 2 percentage points.
Ghana's inflation rate eased slightly to 11.5 percent in August after six months of consecutive increases and from 11.8 percent in July. The decline was due to lower increases in non-food prices, an indication that the pass-through effects of earlier petroleum price adjustments may be ending, the bank said, adding that food prices surprises on the upside.
Economic activity in Ghana had picked up, the central bank said, evidenced by a rise in the central bank's Composite Index of Economic Activity (CIEA) in July, the bank's survey of credit conditions that showed a net easing of credit conditions and increased oil production.
However, the downside risks include budget cutbacks and softening consumer sentiment may also pose a downside risk to the growth outlook.
Ghana's Gross Domestic Product contracted by 3.1 percent in the first quarter for annual growth of 6.7 percent, up from 6.0 percent in the fourth quarter.
The foreign exchange market has become less volatile and the central bank said it expects pressures to ease further with the impending inflows of the cocoa syndication loan market and MDBS disbursements.
In the first eight months of this year Ghana's cedi currency depreciated at a slower rate of 3.9 percent against the U.S. dollar compared with a depreciation of 18.4 percent during the same period in 2012.
Over the last month the cedi has depreciated slightly, trading at 2.17 to the U.S. dollar today, down from 1.9 at the start of the year.