Central Bank stays put in May, meeting market expectations

At its meeting on 22–24 May, the Bank of Ghana (BoG) decided to maintain the policy rate at 29.00%. The hold, which mirrored March’s, met market expectations.

The Central Bank's decision to hold reflected a sluggish disinflation process amid a plunging currency; headline inflation rose in March, primarily due to rising food inflation. Additionally, economic activity showed signs of continued improvement, giving the BoG room to keep a tight monetary policy stance to bring inflation down.

The BoG’s communiqué did not provide explicit forward guidance on the Bank’s future policy moves. All but one of our panelists see the Bank lowering rates further by the end of the year, although the spread remains large at 200–800 basis points of additional reductions. The next monetary policy meeting is scheduled for 23–26 July, with the decision to be announced three days later.

Goldman Sachs analysts said: “In our view, the MPC struck a balanced tone in its statement. Despite highlighting the slowing disinflation momentum and risks to the inflation outlook driven by currency weakness, the MPC […] described inflation pressures as "well-contained". While we maintain our forecast for sizeable monetary policy cuts this year, we now expect the policy rate to decline to only 25% at end-2024 compared with 20% previously due to the risks to the inflation outlook arising from the FX move.”

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