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Ghana Monetary Policy March 2018

Ghana: BoG cuts policy rate amid easing inflationary pressures

At its meeting that concluded on 26 March, the monetary policy committee (MPC) of the Bank of Ghana decided to reduce the monetary policy rate by 200 basis points to 18.0 percent, the lowest policy rate in nearly four years. The Bank’s decision reflected a sustained easing in price pressures over recent months, as well as a more moderate inflation forecast, which have provided scope for monetary policy to adjust interest rates. The decision was anticipated by market analysts.

Inflation has broadly trended down since the previous MPC meeting at the end of January. Headline inflation fell notably to 10.6% in February, from 11.8% in December (January: 10.6%). As a result, inflation ticked down, approaching the Bank’s medium-term inflation target of 8.0% plus or minus 2.0%. Meanwhile, core inflation, which excludes volatile items such as energy and utility, dropped from 12.6% in December to 11.3% in February, signaling moderating underlying inflation pressures. As a result, inflation expectations remained well-anchored towards the Bank’s medium-term target.

The Ghanaian economy finished 2017 on a strong footing; improved currency stability and easing inflationary pressures boosted domestic demand throughout the fourth quarter. Robust growth momentum is expected to have carried over into this year, and GDP growth should stay elevated in the near-term. A favorable commodity price outlook and an expected increase in oil production should fuel overall economic activity.

According to the Bank’s statement, the achievement of the medium-term inflation target of 8.0% plus or minus 2.0% is within the forecast horizon, and the headline inflation is on course to meeting the inflation target band. FocusEconomics panelists see inflation easing in 2018 but foresee it staying slightly above the Bank’s target band. The next monetary policy meeting is scheduled for 16 May, with the decision to be released on 21 May.

Ghana Interest Rate Forecast

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