The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has reduced the monetary policy rate by 200 basis points, bringing it to 27%.
The decision reflects an improvement in macroeconomic conditions since the last MPC meeting in July 2024.
Global and domestic economic improvements
Dr. Ernest Addison, the Governor of the BoG, announced the rate cut during the 120th MPC press briefing.
He highlighted that the global economic environment had shown resilience in the second quarter of 2024, supported by private and government spending, a thriving services sector, and declining oil prices.
The easing of inflationary pressures in advanced economies has also been favorable for domestic growth.
Domestic economy recovery and growth
The Governor noted that the Ghanaian economy continues to recover, with stronger-than-expected Gross Domestic Product (GDP) growth in the second quarter of 2024.
This growth is expected to persist in the second half of the year, driven by construction activity, increased household and firm consumption, rising gold exports, crude oil production, and credit expansion by banks to the private sector.
Improving external payment position
Dr. Addison emphasized that the country’s external payment position has significantly improved, marked by a growing trade surplus and stronger foreign reserves.
This improvement has been driven by a surge in gold exports and financial inflows from the International Monetary Fund (IMF) and the World Bank, resulting in an enhanced balance of payments for the first half of 2024.
The balance of payments is projected to reach a surplus by the end of the year.
Declining inflation and fiscal discipline
Inflation has steadily eased, with headline inflation declining for five consecutive months, reducing by 5.4 percentage points.
Core inflation has also dropped by 6.9 percentage points, indicating that the disinflation process is on track.
The BoG forecasts that inflation will continue to decline, reaching the 13-17% target range for 2024 and moving toward the medium-term target of 6-10% by the end of 2025, barring any unforeseen shocks.
Outlook for 2024
Governor Addison noted that global economic growth has remained steady, aided by declining crude oil prices and moderated food prices.
Major central banks in advanced economies have begun easing monetary policies as inflation continues to decline.
These developments are expected to support domestic economic growth further, providing a stable outlook for the remainder of 2024.
