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Ghana Monetary Policy January 2020

Ghana: Bank of Ghana stands pat in January despite slowing economic growth and easing inflation

On 31 January, the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) decided to keep its key policy rate stable at 16.00%. The Bank’s move was in line with the expectations of most market analysts and marked the sixth consecutive hold.

The decision came despite slowing economic activity growth and easing inflation, suggesting that the BoG prioritized supporting the cedi—which has been volatile in recent months—over trying to boost growth. Inflation slipped below the midpoint of the Central Bank’s 6.0%–10.0% target band at the end of 2019 (December: 7.9%; November: 8.2%), while also clocking in below the government’s 2019 end-of-year target of 8.0%. On top of that, GDP growth softened for the fourth consecutive quarter in Q3 2019, adding pressure to the Central Bank to ease its monetary policy stance. Instead, sustained downward pressures on the cedi, as well as increasing risks of fiscal slippage this year due to upcoming elections, seemingly prevented the Bank from cutting rates.

In its forward-looking guidance, the MPC struck a somewhat neutral tone. The Central Bank stated that “the economy is positioned firmly on the path of stability with inflation forecasted to stay within the medium-term target band” and sees “risks to the inflation and growth outlook as broadly balanced”. As a result, the Bank appears likely to lower the key policy rate by the end of this year if these risks stay at bay—a view shared by the majority of our analysts.

The next MPC meeting is scheduled for 24–27 March, with the decision set to be released on 30 March.

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