BoG cuts prime rate by 100bps to 29%
The Bank of Ghana (BoG) has reduced its Monetary Policy Rate (base rate) to 29 percent.
The reduction indicates a 100 basis points decline in the apex bank’s prime rate from the previous policy rate of 30 percent.
The reduction in the policy rate was announced by the Governor of the Bank of Ghana, Dr Ernest Addison at the 116th Monetary Policy Committee (MPC) press briefing on Monday, January 29, 2024.
The new policy rate follows the review of macroeconomic developments in the country for the past two months by the MPC.
With a reduction in the policy rate, the lending rate by commercial banks to businesses is expected to fall in line with the new policy rate.
According to Dr Addison, the decision by the Committee to cut the policy rate comes on the back of the steady decline in headline inflation from the December 2022 year high of 54 percent to 23 percent in December 2023.
Asserting that inflation expectations are well anchored with the outlook for inflation being continued disinflation as previous policy tightening effects impact both headline and core inflation.
“Headline inflation declined sharply by more than 30 percentage points in the course of 2023. Several factors have supported the disinflation process, namely, the tightening monetary policy stance throughout 2023, favourable international crude oil prices which led to stable ex-pump prices and transportation costs, and relative stability in the exchange rate.
“The latest forecast suggests that the disinflation process will continue, and headline inflation is expected to ease to around 13-17 percent by the end of 2024, before gradually trending back to within the medium-term target range of 6-10 percent 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 percent,” the Governor stated.
