Monetary Policy
MPC Press Release - July 2005
Friday, 29 July 2005 00:00

Developments in the Consumer Price Index during the second quarter of the year indicate that inflation continues to decline, and prices are increasing at a slower pace than in the same period in 2004. Headline consumer price Inflation fell for the third consecutive month from 16.7 percent in March 2005 to 15.7 percent in June on a year-on-year basis.

The drop in Inflation over the quarter has been driven by the continued slowdown in both food and non-food price inflation. The monthly increase in the food price index declined from 3.3 percent in March 2005 to 1.5 percent in June, while the non-food price index declined from 0.6 percent to 0.3 percent over the same period. These increases were much slower than in the same quarter of 2004. The Bank of Ghana’s measures of core inflation continue to be stable within a narrow range, with three of the five measures in the single digit range, between 6.6 and 9.5 percent, and marginally above their rates in the same quarter of 2004.

The latest numbers show that the growth of the monetary aggregates have continued the slow down from the levels observed in the first quarter 2005. At the end of June 2005, the growth of reserve money stood at 15.7 percent, down from 35.4 percent in June 2004 and 19.7 percent in March 2005. Broad money (M2) growth similarly declined from 40.1 percent in May 2004 to 23.0 percent in May 2005 (the latest data available). M2+ growth has also slowed from 38.4 percent in May 2004 to 23.8 percent in May 2005. And foreign currency deposits in the banking system has increased by $118 million (19.0 percent) between May 2004 and 2005.

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