By Kwasi Kpodo

ACCRA (Reuters) - Ghana's central bank raised its benchmark prime interest rate by 100 basis points on Monday to a 3-year high of 17 percent after surging inflation picked up pace again in June, Bank of Ghana Governor Paul Acquah said.

Annual inflation in the cocoa-growing and gold-mining West African country surged to 18.4 percent in June, from 16.9 percent the previous month -- more than double the central bank's original 2008 target band of 6-8 percent.

"The risk in the outlook for inflation is on the upside given the uncertainties associated with oil prices," Acquah told a news conference on Monday following a meeting of the bank's Monetary Policy Committee last week.

"Monetary policy needs to be vigilant to avoid a build-up in inflation expectations," Acquah said.

Monday's rise puts the prime rate at its highest level since April 2005. Official interest rates were over 40 percent for much of the high-inflation 1990s, but the highest prime rate set by the independent MPC since its creation in 2002 was 27.5 percent in early 2003, according to bank data.

Some analysts had been expecting a bigger rise in the prime rate on top of a hefty 175 basis point increase in May.

Investment bank Renaissance Capital said last week that had pushed Ghana's real interest rates into negative territory, equating to -240 basis points, and predicted the central bank would raise rates by as much as 250-300 basis points.

Like other countries around the world, Ghana has seen high oil and food prices push up inflation, causing problems for poor people for whom food and transport account for more than half of household spending.

GROWTH

Acquah said growth remained "robust" and gold exports from Africa's second biggest producer had increased in value to $1.19 billion in the first six months of 2008, from $821 million in the same period of 2007.

"The banking system remains liquid and is building diversified portfolios funded by increased deposits with some tightening in credit conditions," he said.

"Growth momentum in the economy has been sustained with activity proceeding above trend and with strong demand growth driven by exports and increased fiscal stimulus ... The prospect is for continued (economic) growth at a robust pace," he said.

Acquah gave no figure for economic growth in his speech, but Deputy Governor Lionel Van Lare Dosoo told Reuters afterwards that economic growth was currently around 6 percent.

"We think we are not doing too badly," Dosoo said.

After the last MPC meeting in May, Acquah said Ghana's economy was on track to reach a growth target of 6.3 percent by the end of the year.

Dosoo said growth was helped to an extent by investor interest sparked by planned oil production.

Ghana has discovered offshore oil, but it is not due to start significant crude production until the first quarter of 2010.