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Ghana Monetary Policy January 2024

Ghana: Bank of Ghana kicks off loosening cycle in January, surprising markets

At its first scheduled meeting of 2024 on 23–26 January, the Monetary Policy Committee of the Bank of Ghana (BoG) kickstarted its loosening cycle, slashing its policy rate by 100 basis points to 29.00%. The move, which was the first cut since May 2021, took markets by surprise as a third hold had largely been anticipated.

The cut aimed to support activity, as the Bank noted that GDP growth remained below potential despite continued economic recovery through Q3 2023. The move was further backed by a consolidating downward trend in inflation: Sound monetary policy and a relatively stable exchange rate drove headline inflation down to 23.2% in December 2023 from its peak of 54.1% 12 months earlier. Similarly, core inflation more than halved to 24.2% in December 2023 from December 2022. Market agents’ inflation expectations have also declined.

The BoG’s communiqué was void of explicit forward policy guidance. The Bank expects inflation to ease to 13–17% by the end of this year and to fall within its 6.0–10.0% target band in 2025. It added that monetary policy would remain tight to achieve these targets, noting that upside risks to the inflation outlook remained.

Although virtually all of our panelists see further rate cuts this year, there is a large spread: Between 100–1,300 basis points worth of additional cuts have been penciled in.

The next monetary policy meeting is scheduled for 20–22 March, with the decision to be announced on the 25th of the month.

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