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Ghana Monetary Policy May 2021

Ghana: Central Bank cuts rates in May, surprising market analysts

At its meeting on 19–21 May, the Monetary Policy Committee of the Bank of Ghana surprised market analysts by lowering its policy rate by 100 basis points to 13.50%, having held the rate steady for six consecutive meetings.

The decision came amid easing price pressures, with inflation dropping to 8.5% in April (March: 10.3%) and thus falling within the Bank’s target range of 6.0%–10.0%. Moreover, the Bank highlighted a lack of certainty regarding the economic outlook as a result of the ongoing pandemic and the potential for further waves due to new variants of the virus. As such, it decided to cut its policy rate in order to ease pressure on the financial system and further spur activity.

Commenting on the outlook, Andrew Matheny and Maria Ludovica Ambrosino, economists at Goldman Sachs, noted:

“Looking ahead, we maintain a baseline for the policy rate to remain on hold through year-end, although today’s cut raises the probability of further cuts significantly should the cedi remain well supported by capital inflows and supportive terms of trade and, hence, inflationary risks decline further.”

The next meeting is scheduled for 21–23 July, with the decision to be announced on 26 July.

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