Ghana’s monetary authorities on Wednesday announced a further 350-basis-point cut in the benchmark lending rate to 21.5 percent, down from 25 percent, as inflation continues to ease.
Bank of Ghana Governor Johnson Asiama said the decision taken at the 126th regular meeting of the Monetary Policy Committee (MPC) of the Bank of Ghana was in line with the easing of inflation and inflationary pressures, with inflation easing to 11.5 percent in August.
This marked the second policy rate reduction this year after a 300-basis-point cut during the July sitting of the MPC, bringing the rate down to 25 percent.
The governor added also that the local cedi currency remains among the strongest currencies globally, year to date, reflecting prudent monetary policy, effective liquidity management, fiscal consolidation, and increased foreign exchange inflows.
“Given the current state of macroeconomic conditions, the view of the MPC was that inflation will continue to ease in the near term, and in the outlook, headline inflation is expected to drop to within the medium-term target of eight plus or minus two percent by the end of the fourth quarter,” Asiana stated.
He, however, cautioned that a possible increase in utility tariffs could exert some price pressures in the medium term, which would be controlled with the maintenance of an appropriate monetary policy stance, strong sterilization efforts, ongoing fiscal consolidation, and adequate reserve buffers to sustain the disinflation process.
“Given these considerations, the MPC, by a majority decision, voted to lower the mandatory policy rate by 350 basis points to 21.5 percent. The committee will continue to monitor macroeconomic developments and take appropriate policy decisions as and when necessary to reinforce the disinflation process,” the governor announced.
The West African cocoa, gold, and crude oil exporter, which has been implementing reforms since May 2023 with the support of a 3-billion-dollar loan from the International Monetary Fund, has seen some positive macroeconomic indices in recent months, including inflation, which fell to 11.5 percent in August, the lowest since Oct 2021.