Central Bank Makes Big Cut on Policy Rate as it Reduces Rate to 21.5%
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG), has reduced its monetary policy rate by 350 basis points (3.5%).
With the reduction in the benchmark mark interest rate, the monetary policy rate of the Central Bank now stands at 21.5%.
Announcing the new policy rate, Governor of the Central Bank, Dr Johnson Asiama noted that the reduction is on the basis of expected easing of headline inflation, with inflation anticipated to decline into the Bank’s medium term target band of 8+-10% by the fourth quarter of 2025.
The reduction, according to the Governor, is despite some medium-term risks from the proposed increment in utility tariffs.
Announcing the new policy rate, Dr Asiama stated, “Given the current state of macroeconomic conditions, the view of the Committee was that inflation will continue to ease in the near term. In the outlook, headline inflation is expected to drop to within the medium-term target of 8 ± 2 percent by the end of the fourth quarter. However, the possible upward review of utility tariffs could exert some price pressures in the medium term. Notwithstanding this, maintenance of an appropriate monetary policy stance, strong sterilisation efforts, ongoing fiscal consolidation, and adequate reserve buffers should sustain the disinflation process.”
“Given these considerations, the Committee, by a majority decision, voted to lower the Monetary Policy Rate by 350 basis points to 21.5 percent. The Committee will continue to monitor macroeconomic developments and take the appropriate policy decision as and when necessary to reinforce the disinflation process,” he added.
Given the reduction in the policy rate, interest rates on loans to businesses and households are expected to reduce, thereby moderating the cost of capital to the private sector.
