Fitch forecasts 800bps cut in Ghana’s base rate for 2024
In a forward-looking analysis, Fitch Solutions, forecasts a substantial monetary easing initiative by the Bank of Ghana (BoG). The projection outlines a noteworthy policy rate reduction of 800 basis points (8%) bringing the rate down to 22% from 30% by the close of 2024.
Fitch Solutions attributes this anticipated easing cycle to a marked moderation in headline inflation expected to unfold throughout the year 2024. The firm underscores the connection between inflation dynamics and the forthcoming adjustments in the BoG’s monetary policy stance.
Recognizing the inherent lag in monetary transmission mechanisms, Fitch Solutions elucidates that the tangible impact of interest rate adjustments typically manifests after a 12-month period. This temporal nuance is pivotal for comprehending the potential delay in the real economy’s response to the envisaged policy changes.
Despite the dovish monetary policy stance adopted by the BoG, Fitch Solutions expresses reservations about an immediate surge in real loan growth. Fitch highlights that real loan growth has persistently dwelled in the contractionary territory from January to August 2023, signaling ongoing challenges in credit accessibility.
Providing historical context, Fitch Solutions points to the BoG’s policy decisions since 2021. Over this period, the benchmark policy rate experienced a substantial hike of 1,150 basis points, peaking at 30%. Fitch posits that this tightening stance has curtailed access to corporate credit, setting the stage for the predicted easing cycle.
As the Monetary Policy Committee of the Bank of Ghana gears up for its 116th regular meetings from January 23 to January 26, the insights offered by Fitch Solutions furnish a comprehensive understanding of the expected monetary policy trajectory and its potential ramifications, particularly in the realm of credit access within the Ghanaian financial landscape.
