This is part of the BoG’s effort to stimulate the economy and protect the country from the impact of COVID-19.
A statement released by the Central Bank said “the latest inflation reading for February 2020 is estimated at 7.8 percent, unchanged from January 2020. The forecast for inflation is expected to remain within the target band for the next quarter.”
“Under these circumstances, the Bank of Ghana’s MPC has decided to lower the Monetary Policy Rate by 150 basis points to 14.5 percent,” the statement added.
This is the first time in 14 months since the policy rate was reduced to 16%.
The reduction is expected to increase spending in the Ghanaian economy since the cost of credit will go down whilst more money will be in circulation.
The Central Bank said the negative impact of COVID-19 on exports, imports, taxes, and foreign exchange receipts will slowdown economic activities hence the reduction.
“GDP growth is forecasted to decline to 5.0 percent in a baseline scenario. In the worst-case scenario, GDP growth estimates could be halved to about 2.5 percent in 2020. These assessments are preliminary as the situation is very fluid and the degree of uncertainty concerning the outbreak is very high. This means that there is a likelihood that these assessments could change rapidly.”