Following the effect of the rising crude oil prices and the escalating cost of food on the economy, the Central Bank has dismissed projections for single digit inflation by the close of this year, saying, "It is not possible".

Consequently, the Monetary Policy Committee of the Bank of Ghana has pegged the Prime Rate at 16 percent from the previous rate of 14.25 percent.

Central Bank Governor Paul Acquah announced this at a news conference in Accra yesterday.

"Given the shocks in the system, the horizon has to be extended beyond this year," he said.

"Inflation and cost price pressures have increased amidst rising and volatile oil prices, and a surge in food prices. And, uncertainty about developing inflation has weighed down business and consumer confidence, while the general assessment of economic prospects remains strongly positive," the Central Bank boss said.

According to him, "inflation has risen sharply over the past three months. Both headline and core inflation is now significantly above the target set over the medium term".

Governor Acquah said the risks in the outlook for inflation is on the upside with uncertainty about oil price increases and volatility and the potential for inflation expectations to become embedded in pricing and wage cost structure.

Inflation numbers released by the Ghana Statistical Service show that, inflation has risen significantly to 13.8 percent at the end of March this year, and a further 15.3 percent in April this year, after reaching a low of 10.2 percent in September 2007.

Food inflation, which was 9.3 percent in September 2007 rose to 13 percent at the end of March 2008.

Non- food prices also moved from a low of 10.9 percent in September 2007 to 14.4 percent in March 2008 and a further 16.9 percent in April 2008.

But Governor Acquah said, the economy has been resilient in terms of output and demand growth with economic activity proceeding at a pace above trend and with relative stability in the exchange market.

The bank's survey of Business and Consumer confidence indicate that confidence has softened over the first quarter of 2008, amid uncertainty about oil prices and rising inflation, while both business and consumer expectations about economic prospects for the rest of the year remain generally positive.

The Chairman of the MPC said credit to the private sector and public institutions increased by GH¢ 1,615.8 million, or at an annual rate of 57.3 percent compared with GH¢ 846.0 million (50.4 percent) recorded for the same period in 2007. The private sector accounted for 81 percent (GH¢ 1,308.2 million) of the increase in credit.

According to him, services accounted for 33.9 percent, commerce and finance 17.9 percent, miscellaneous 16.1 percent, construction 9.3 percent, manufacturing 5.6 percent and transportation, storage and communication 5.4 percent. The remaining sectors recorded increases of between 1.0 percent and 4.9 percent.