Ghana Central Bank Lifts Benchmark Rate by One Point

Posted 23 July 2008 @ 01:33 am EET     Print     Reprint     E-Mail     Comments

Accra (IBTimes.com) - Ghana's central bank increased its benchmark interest rate for a third time this year, lifting it by one percentage point, after record oil and food costs boosted inflation.

The Prime Rate was raised to 17 percent, Bank of Ghana Governor Paul Acquah told reporters in the capital Accra today. The bank last raised the rate by 1.75 percentage points on May 19.

Oil prices above $140 a barrel and rising food costs boosted inflation in Ghana to an annual 18.4 percent in June, the fastest pace in more than three years. The central bank, which last year missed its target of bringing the inflation rate below 10 percent, is concerned that rising price pressures will boost wage demands.

``Monetary policy needs to be vigilant to avoid a build-up in inflation expectations,'' Acquah said. ``The risk in the outlook for inflation is on the upside given the uncertainties associated with oil prices.''

The government should cut back on spending to curb price pressures, which threaten to undermine the country's ``hard- earned achievements,'' the International Monetary Fund said on July 16.

``Monetary policy alone cannot fight inflation, and its effectiveness should be enhanced through fiscal consolidation,'' the Washington-based IMF said last week.

Cocoa exports rose 26 percent to $934.2 million in the first half of the year compared with the same period last year, Acquah said. Gold exports surged 46 percent to $1.2 billion in the same period.

Ghana is the world's second-biggest cocoa producer, after Ivory Coast, and the Africa's second-largest gold producer, after South Africa.