Bank of Sierra Leone

BANK OF SIERRA LEONE

STATEMENT BY MONETARY POLICY COMMITTEE

Governor Sesay

 The Monetary Policy Committee (MPC) met on Thursday 24th May 2012 to discuss recent economic developments along with their implication for monetary policy management as well as to review the bank of Sierra Leone Monetary Policy Rate (MPR).

The MPC discussed global economic trends and their implications for economic growth prospects in Sierra Leone. The Committee noted that global economic trends point to recovery but at varying paces across different regions of the world. Whilst growth in Euro zone is projected to slow markedly in 2012, growth in sub– Saharan Africa (the region relatively less exposed to the global slowdown) is projected to pick up to 51/2 percent. The committee noted that there are downside risks to the Balance of Payments of Sierra Leone, notwithstanding the benign outlook of prices of the country’s main export commodities.

The committee discussed developments in the sector and noted that the Sierra Leone Business Confidence Survey Report for Quarter 1 of 2012 showed improvement in business sentiments, with the index increasing by 1.9 points from Q4 2011 to 65.9 index points. The highest improvement was observed in the trade sector which recorded a 5-point increase during the period to 63.9 points. Recent stability of the value of the Leone (relative to major foreign currencies) and declining inflation are behind the observed strengthening of business sentiments.

The MPC also discussed recent developments in prices and that the national consumer price inflation has declined from 14.5 percent (year-on-year) in March 2012 to 13.7 percent in April 2012, supported mainly by relative stability in the value of the Leone and the Bank’s tight monetary policy stance. While food inflation declined from 18.4 percent (year-on-year) in March 2012 to 17.7 percent in April 2012, (compared with 24.8 percent a year ago), non-food inflation weakened by half a percentage point in the month to 13.5 percent (having reached 16.1 percent a year ago).

In discussing the appropriateness of the Bank’s monetary policy stance in the light of these developments, the MPC noted that growth in monetary aggregates has been trending downwards, consistent with the Bank’s tight stance on monetary policy to contain inflationary pressures and keep inflation at a sustainably low level. The committee also noted the efforts being made by the fiscal authorities in public expenditure management in support of the Bank’s monetary policy stance.

In view of these recent economic developments, the current interest rate structure and discussions outlined above, the MPC decided to keep the Bank’s Monetary Policy Rate (MPR) unchanged at 20%. Hence, effective Monday May 28, 2012, the following rates are published for the information of the money market:-

·  Monetary Policy Rate is 20%;

· Reverse Repo Rate 22% (200 basis points above the MPR);

· Standing Facility Rate is 30% (1000 basis points above the MPR)

These rates will remain effective until the next MPC meeting.

Governor

Bank of Sierra Leone

24th May 2012.