Ghana Monetary Policy May 2018


Ghana: Bank of Ghana slashes policy rate to an over four-year low

May 21, 2018

Moderating inflationary pressures in recent months prompted the Bank of Ghana to cut its monetary policy rate by 100 basis points to 17.00% at its Monetary Policy Committee (MPC) meeting that concluded on 21 May. The Bank’s decision brought the key rate down to its lowest level since January 2014 and marked an 850-basis-point easing over the past 12 months.

Moderating headline inflation and well-anchored inflation expectations allowed the bank to soften its monetary policy stance in May. Underlying price pressures continued to retract in April, ticking down to 9.6% from 10.4% in March and marking the first time the inflation rate fell to single digits in over four and a half years. As a result, inflation moved to within the Central Bank’s medium-term inflation target of 8.0% plus or minus 2.0 percentage points. Furthermore, according to the Bank’s survey, weighted inflation expectations by consumers, businesses and the financial sector also pointed to the sustained easing of inflationary pressures this year.

According to the Bank’s communiqué, headline inflation should stay within target this year. Improving economic fundamentals and favorable commodity prices are expected to buoy the economy this year, and the Bank does not expect either domestic or global developments to constitute significant risks to inflation in the near term. Meanwhile, the probability of further rate cuts in the near term remain high as inflation continues trending downwards.

The next MPC meeting is scheduled for 18 July, with the decision to be released on 23 July.

FocusEconomics Consensus Forecast panelists expect the monetary policy rate to end 2018 at 16.00% and 2019 at 14.20%.

Author:, Research Team Manager

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Ghana Monetary Policy Chart

Ghana Monetary Policy May 2018

Note: Monetary Policy Rate in %.
Source: Bank of Ghana (BOG).

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