Ghana's central bank maintained its policy rate at 16.0 percent, saying the upside risks to inflation were mainly structural and may not need to be countered by higher interest rates while there are no significant risks to economic growth.
The Bank of Ghana, which raised rates by 100 basis points in May, said the upside risks to inflation that had been identified earlier this year had crystalized in the form of pass-through of higher petroleum and electricity prices - following the removal of subsidies and higher utility tariffs - as well as fiscal and exchange rate pressures.
The central bank said it expects headline inflation to breach it's target this year but inflation should track back to the target of 9.5 percent, plus/minus 2 percentage points, by the end of 2014 as fiscal measures in the 2014 budget should mitigate some of the pressures.
Ghana's inflation rate jumped to 13.1 percent in October from 11.9 percent in September, the highest rate in more than 3-1/2 years and continuing the trend of rising inflation from last year's average inflation rate of 9.2 percent and 8.7 percent in 2011. The International Monetary Fund has forecast 11.0 percent average inflation this year, declining to 9.8 percent in 2014.
Economic activity is forecast to improve in the third quarter, the bank said, citing the economic activity index (CIEA), which rose by 7.5 percent at the end of September from 5.8 percent in July.
"The key drivers of economic activity for the third quarter were DMB's credit to the private sector, industrial consumption of electricity, SSNIT contributions and port activity," the bank said.
Ghana's Gross Domestic Product expanded by 3.9 percent in the second quarter from the first quarter for annual growth of 6.1 percent, down from 6.7 percent in the first.
Ghana's finance minister recently forecast that the economy would expand by 8 percent in 2014, up from an estimated 7.4 percent this year. He also said the government aimed to narrow the budget deficit to 8.5 percent of GDP in 2014 from about 10.2 percent this year.
In the first nine months of this year, the budget deficit was 8.4 percent of GDP compared with a target of 7.2 percent due to lower imports, commodity prices and a slowdown in the economy, the central bank said.
Ghana's current account deficit widened to US$4.5 billion in the first nine months of the year from $4.1 billion in the same 2012 period due to a deterioration in the services, income and transfers account but this was moderated by a better trade balance.
In the first 10 months of the year, Ghana's exports were largely steady at $11.4 billion from last year with earnings from gold down 12 percent to $4.2 billion while cocoa bean exports fell by 33.5 percent to $1.3 billion due to lower prices. Oil exports, however, rose by 30.9 percent to $3.9 billion to to higher production and earnings from non-traditional exports, which includes cocoa products, rose 25.8 percent to $2.2 billion.
As of Nov. 20, Ghana's cedi currency had depreciated by 9 percent against the U.S. dollar, less than 17.4 percent in the same 2012 period.