BoG reduces policy rate to 27% from 29%

The Bank of Ghana has reduced its Monetary Policy Rate by 200 basis points to 27.0%, reflecting confidence in the nation’s improving macroeconomic outlook.

The announcement was made by Dr. Ernest Addison, Governor of the Bank of Ghana, following the 120th meeting of the Monetary Policy Committee (MPC).

The rate cut follows five consecutive months of declining inflation and stronger-than-anticipated economic growth.

“Headline inflation has eased, and growth has picked up,” said Dr. Addison, noting that inflation dropped to 20.4% in August 2024 from 22.8% in June, with food inflation experiencing the steepest decline.

Ghana’s GDP grew by 6.9% in the second quarter of 2024, driven by strong performance in the industrial sector, which expanded by 9.3%. The services and agriculture sectors also posted gains of 5.8% and 5.4%, respectively.

The Central Bank reported increased consumer and business confidence, buoyed by “easing inflationary pressures,” while core inflation—excluding volatile items like energy—fell significantly.

Additionally, the Bank highlighted stronger fiscal performance, with a budget deficit of 2.4% of GDP, lower than the projected 2.8%.

Dr. Addison pointed out that global conditions have also become more favourable, as central banks in advanced economies have eased policy rates, spurring equity market rebounds and increased capital flows to emerging markets like Ghana.

“The disinflation process is on course,” he emphasised, projecting inflation to ease further towards a target range of 13-17% by the end of 2024 and 6-10% by the close of 2025.

According to him, the MPC’s decision to lower the rate is part of a broader strategy aimed at sustaining economic growth while maintaining price stability.