Ghana Monetary Policy March 2017


Ghana: Bank of Ghana slashes policy rate in March

March 30, 2017

At its 24 March monetary policy meeting, the Bank of Ghana (BOG) slashed the monetary policy rate by 200 basis points from 25.5% to 23.5%, the largest single cut in over a decade. The move caught analysts, who were banking on a much smaller cut, flat-footed.

The Bank’s decision comes after inflation has been progressively falling for several months from a peak early last year, thanks in large part to a relatively stable currency, tight monetary conditions and some base effects. In addition, growth last year is expected to have been modest, with the economy buffeted by lower oil prices and operating significantly below potential. Following a large fiscal overrun last year, the new government announced substantial belt-tightening measures in the March budget in order to get the budget deficit under control. The BOG’s rate cute should help counteract the effect of tighter fiscal policy on domestic demand and boost output going forward.

The communique was slightly dovish in tone, with the BOG judging there to be scope for further monetary easing going forward. The Bank pledged to continue monitoring economic developments in order to ensure the inflation target is met, and forecasts inflation drifting down towards its 6.0%-10.0% target band by 2018, which is broadly in line with FocusEconomics panelists’ predictions.

The next policy meeting is scheduled for 19 May 2017.

FocusEconomics Consensus Forecast panelists expect the monetary policy rate to end 2017 at 21.4%. For 2018, panelists project that the monetary policy rate will end the year at 17.3%.

Author:, Economist

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