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Ghana Monetary Policy September 2020

Ghana: Central Bank decides third consecutive hold in September

At its 22–25 September meeting, the Monetary Policy Committee of the Bank of Ghana voted to maintain the policy rate unchanged at 14.50%, marking the third consecutive hold and the lowest rate since May 2012. The Committee announced its decision on 28 September.

The hold was largely driven by signs of an economic recovery and easing inflationary pressures. GDP fell 3.2% on an annual basis in the second quarter, dropping for the first time in four years, as Covid-19 containment measures took their toll on the economy. Nonetheless, the Bank expects improved dynamics for the second half of the year, as indicated by consumer spending, industrial consumption of electricity and construction activity reaching pre-lockdown levels in July. Business and consumer confidence also rose in August, with the latter returning to pre-pandemic levels. On the price front, inflation fell to 10.5% in August from July’s over two-year high of 11.4%, amid declining food price pressures and increased exchange rate stability. The Bank assessed that these drivers will continue ahead and thus, given this improved outlook, inflation is expected to return to its medium-term target of 6.0–10.0% by the second quarter of 2021.

In its press release, the Committee struck a relatively neutral tone, stressing that risks to the inflation and growth outlook remain balanced. Meanwhile, it highlighted the need for fiscal consolidation to stabilize debt levels, as they could pose a risk to macroeconomic stability over the long term. Against this backdrop, our panelists are split with a slight majority seeing the Bank staying put.

The next meeting is scheduled for 18–20 November, with the decision to be announced on 23 November.

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