The Monetary Policy Committee (MPC) of the Bank of Ghana (BOG) at its 120th meeting has lowered the policy rate by 200 basis to 27%. This is a drop from 29% which had stood for several months. According to the BOG Governor, Dr Ernest Addison, the MPC made this decision due to a general improvement in macroeconomic conditions.
He said, “Headline inflation since the first quarter has declined for the fifth consecutive month by 5.4 percentage points. Core inflation has also declined sharply over the same comparative period by 6.9 percentage points.”
The trends, he added, suggests that the disinflation process is on course. Latest forecast showed that inflation will continue to ease towards the range target of 13% to 17% for the year and then steadily track back towards the medium-term target of 6% to 10% by the end of 2025, barring unanticipated shocks.
In announcing the policy rate at the end of the MPC meeting on Friday, Dr Addison observed that global macroeconomic climate has seen inflation slow down continuously on account of declining crude oil prices, food prices and moderating wage growth. In addition to that, central banks in major advanced economies such as the US, EU and the UK have reduced their policy rates, however the expectation for lower policy rates has brought down long-term bond yields, he continued.
Locally, Dr Addison was optimistic about future economic conditions in the country as latest surveys conducted in August 2024 show a rebound in both consumer and business confidence. He noted that consumer confidence improved on account of easing inflationary pressures.
According to the Ghana Statistical Service’s provisional GDP data for the second quarter of 2024, Real GDP grew by 6.9 percent in the second quarter of 2024, compared with 2.5 percent in the corresponding quarter of 2023 and 4.7 percent in the first quarter of 2024. Non-oil GDP growth was 7 percent, compared with 3.1 percent in the same period of 2023. Industry grew by 9.3 percent, having contracted by 2.6 percent same time last year while services and agricultural sectors also grew by 5.8 percent and 5.4 percent, respectively.
“Trends in the bank’s high-frequency real sector indicators point to sustained pickup in economic activity. The updated real composite index of economic activity recorded an annual growth of 1.6 percent in July 2024, compared to a contraction of 2.8 percent for the corresponding period of 2023. Construction activities, consumption demand by households and firms, exports, imports, and tourist arrivals contributed to the improvement in economic activity during the period.”, He observed