The Monetary Policy Committee of Ghana’s central bank has announced the first reduction in its policy rate for the first time in five years — by 50 basis points to 25.5 per cent — on positive outlook for inflation and the need to boost growth.

“The outlook for inflation is broadly positive as reflected in the continued decline in the underlying inflation, stability in the foreign exchange market, low aggregate demand conditions and general high real interest rates,” Bank of Ghana Governor Abdul-Nashiru Issahaku told a media conference here Monday.

However, he added, growth conditions remained weak and below trend, underpinned by weak global demand, declining commodity prices and disruptions in the production of oil and gas. Other factors include weak private sector credit growth as a result of the tight credit stance and fiscal consolidation efforts, conditions which are expected to prevail in the outlook.

“With these considerations, the Committee concluded that the downside risks to growth outweigh the risks to inflation and, therefore, decided to reduce the Policy Rate by 50 basis points to 25.5 per cent,” he said.

Dr Issahaku said the inflation outlook remained positive and barring any major price shocks, the forecast remained broadly unchanged and inflation was expected to return to the medium-term target band in 2017.

Headline inflation has gradually trended downwards this year after peaking at 19.2 per cent in March. It fell sharply to 15.8 per cent in October from 17.2 per cent in September.

Similarly, the Bank’s main measure of core inflation (CPI inflation excluding energy and utility prices) which measures underlying inflation, continued on its descent, declining from 16.9 per cent in September to 15.2 per cent in October.

Dr Issahaku said the current tight policy stance and exchange rate stability should further support the disinflation process.