The Monetary Policy Committee of the Bank of Ghana (BoG) has cut its key lending rate to 29.0% from 30% in line with most analysts expectations.
The Chairman of the committee, Dr. Ernest Addison, made the announcement after its 116th meeting.
According to him, the decision was taken following a steady decline in inflation from 54.0% in December 2022 to 23.4% in December 2023 though there are downside risks.
The latest forecast suggests that the disinflation process will continue, and headline inflation is expected to ease to around 13-17% by the end of 2024, before gradually trending back to within the medium-term target range of 6-10% by 2025. These forecasts notwithstanding, there are upside risks to the inflation outlook and there is need for strict implementation of the 2024 budget and a tight monetary policy stance to sustain the disinflation process”.
“The Committee noted the emerging recovery but sees the need to maintain a strong policy stance to consolidate the disinflation gains. Under these circumstances, the Committee decided to reduce the Monetary Policy Rate by 100 basis points to 29.0%”, the Governor added.
Overall, the MPC noted that global growth had remained relatively subdued in 2023, while the ease in global inflation had triggered a pause in monetary policy tightening across key economies.
On the domestic economy, the Governor speaking on behalf of the MPC said there are clear indications that the current macroeconomic framework being implemented with the support of the IMF ECF
programme is yielding positive results, adding, the macroeconomic fundamentals have all trended in the right direction.
Interest rates trended downwards
On the money market, interest rates broadly trended downward at the short end of the yield curve. The 91-day and 182-day Treasury bill rates decreased to 29.49% and 31.70% respectively, in December 2023, from 35.48% and 36.23% respectively, in the corresponding period of 2022.
Similarly, the rate on the 364-day instrument decreased to 32.97% in December 2023 from 36.06% in December 2022.
Interbank weighted average rate within policy
The interbank weighted average rate remained well-aligned within the policy corridor by the end of 2023.
The weighted average rate increased to 30.19% in December 2023 from 25.51% in December 2022, in line with the monetary policy rate and supported by adjustments made in the cash reserve ratio.
The average lending rates of banks eased marginally to 33.75% in December 2023 from 35.58% a year aearlier.