Bank of Ghana MPC convenes for 116th meeting amidst calls for significant policy rate cut
The Monetary Policy Committee (MPC) of the Bank of Ghana has commenced its 116th meeting for this year starting today, January 23, 2024. The central focus of this gathering lies in the mounting pressure on the Committee to enact a substantial reduction in the policy rate, spurred by a persistent decline in inflation.
Despite maintaining the policy rate at 30.0% in November 2023, the inflation rate eased to 23.4% in December of the same year. Governor of the Bank of Ghana, Dr. Ernest Addison, earlier affirmed the institution’s dedication to a tight monetary policy stance but indicated a willingness to adjust the policy rate when deemed necessary.
The MPC is expected to prioritise the recent International Monetary Fund Board approval of the first review of Ghana’s programme and the $600 million bailout package from the Fund and its impact on the economy.
Already, Fitch Solutions, has stated that it expects the policy rate to go down by 8 percentage points in 2024.
“With inflation moderating substantially through 2024, we anticipate that the BoG will embark upon a sizeable monetary easing cycle, cutting the policy rate by a cumulative 800bps to 22% by year-end,” it said.
However, the intricacies of monetary transmission mechanisms may pose challenges, with Fitch Solutions noting that the real impact of interest rate adjustments may take up to 12 months to materialize in the actual economy.
The MPC’s agenda also encompasses a meticulous assessment of the prevailing business environment, with a keen eye on both business and consumer risk factors. Notably, third-quarter indicators from 2023 suggest a moderate but sustained uptick in economic activity, with select sectors experiencing growth and others facing a slowdown.
As the Bank of Ghana navigates these complex dynamics, the MPC’s decision-making process is poised to shape the trajectory of Ghana’s economic landscape. The nuanced balance between maintaining a tight monetary policy stance and responding to evolving economic conditions will be closely watched by stakeholders and international observers alike.
In the ever-evolving financial landscape, the decisions emerging from the 116th MPC meeting are poised to resonate far beyond Ghana’s borders, influencing investor sentiment and shaping the narrative around the nation’s economic resilience.
