Monetary Policy
MPC Press Release - March 2003
Monday, 31 March 2003 00:00

Since the last MPC meeting was held in January, developments in the economy show clear signs of continued build-up of inflationary pressures. Annual consumer price inflation as measured by the consumer price index, turned in at 16.3 percent in January, edging up from 15.2 percent recorded in December 2002.

The impulses underlying the upturn in the inflation rate since the beginning of the fourth quarter of 2002, were the feed through of the public sector borrowing of the 2002 budget, the liquidity injection of currency for purchases of the unexpectedly large 2002/2003 cocoa crop, and downward pressures on the exchange rate stemming from the above trend growth in domestic liquidity as well as the effect of the sharp depreciation of the US dollar viz-a-viz the Euro (and the pound sterling).

The underlying consumer price inflation increased considerably in February mainly on the strength of the pass-through effects of the corrective adjustments to fuel prices that were made in January 2002. The national consumer price index recorded an estimated jump of close to 12.8 percentage points in February. This was well above normal cost-price expectations and reflected exaggerated reactions to the fuel price adjustment in the markets for goods and services. The data for March should shed light on the extent to which these price changes have become embedded.

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