Monetary Policy
MPC Press Release- January 2005
Monday, 31 January 2005 00:00

During the last quarter of 2004 headline inflation eased from the 12.6 percent recorded in September to 11.8 percent at the end of December. The drop in inflation reflected a combination of improved food supply, a relatively stable exchange rate in conditions of diminishing inflationary pressures. The latest numbers mean that headline inflation now stands at half its December 2003 level of 23.6 percent and closer to the single-digit policy target.

Non-food price inflation fell from 27.9 percent in December 2003 to 7.9 percent in December 2004. It fluctuated in the single-digit range for most of 2004. Food prices on the other had declined from 21.5 percent in December 2003 to 15.5 percent by December 2004 but generally remained sticky above that level. The Bank of Ghana’s core Inflation measures also tracked the declining price pressures, with three of the five core measures reaching single-digit levels since September 2004.

The fiscal and monetary policy mix for the year has meant downward pressure on the growth of the monetary aggregates. On an end-period basis, reserve money growth declined from 33.4 percent in December 2003 to 18.8 percent in December 2004, which was the lowest growth recorded in recent years and below the target growth of 20.5 percent for the year.

Available data through November 2004 show that broad money growth is on a similar downward growth path and should be close to its target growth of 24.0 percent for December 2004. At the same time there was a significant increase of ¢2,541 billion in the net foreign assets of the banking system which benefited from improved foreign inflows and cocoa export receipts.

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