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Monetary Policy Rate Ghana reduces benchmark rate as inflation drops and cedi gains

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The Monetary Policy Committee (MPC) of the Bank of Ghana has reduced the Monetary Policy Rate by 200 basis points to 23.5 percent.

Ghana’s central bank cut its benchmark interest rate for a second time in four months as the cedi recovered from record lows and inflation slowed to the lowest rate in more than three years.

The Bank of Ghana reduced the rate to 23.5 percent from 25.5 percent, Governor Abdul Nashiru Issahaku told reporters Monday in the capital, Accra.

play Governor of the Bank of Ghana - Abdul Nashiru Issahaku


That’s the biggest single cut in borrowing costs since February 2010.

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“Underlying inflation pressures have eased considerably and inflation is projected to trend down towards the medium-term target,” Issahaku said.

Indications that growth is likely to remain significantly below potential and an improved inflation outlook provide “some scope for monetary policy easing,” he said.

The central bank reduced its key rate in November for the first time since May 2011 even as inflation has remained outside the central bank’s target band of 6 percent to 10 percent since at least January 2013.

Price growth slowed for the fifth consecutive month in February to 13.2 percent, the lowest since November 2013.

play Inflation Data from the Ghana Statistical Service


The MPC noted that underlying inflation pressures have “eased considerably and inflation is projected to trend down towards the medium term target.”

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However, it added, “there are indications that growth is likely to remain significantly below potential, which alongside an improved inflation outlook provides some scope for monetary policy easing. In addition, recent developments in inflation imply an implicit tightening.”

The Committee said it will continue to monitor developments and take appropriate action necessary towards the attainment of its inflation target.

The next Monetary Policy Committee (MPC) meeting is scheduled for May 19, 2017. The meeting will conclude on May 22, 2017 with the announcement of the policy decision.

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The cedi has recovered from record lows reached earlier this month and gained 8.3 percent since the beginning of March after Finance Minister Ken Ofori-Atta announced plans to narrow the fiscal deficit, which was 8.7 percent of gross domestic product in 2016.

The cedi weakened 1.2 percent to 4.35 per dollar by 12:23 p.m. in Accra on Monday.

Ghana’s two-month old government, led by President Nana Akufo-Addo, plans to boost spending even as it reduces taxes on goods including fuel.