KEY POINTS
- Bank of Ghana policy rate cut to 21.5 percent.
- Inflation seen easing into target range by year-end.
- Cheaper credit expected to further boost private-sector growth.
Ghana’s central bank lowered its benchmark lending rate by 350 basis points to 21.5 percent. This was the biggest drop in years, and it showed that officials were sure that inflation was returning to target.
The Bank of Ghana’s Monetary Policy Committee (MPC) made the announcement during its 126th meeting in Accra. They said the drop should make banks lower the cost of borrowing for firms and households, which will lead to more investment and job creation.
The MPC is sure that inflation is going down
According to Governor Johnson Pandit Asiama, most committee members supported the Bank of Ghana policy rate cut because they thought that headline inflation would drop further more by the fourth quarter.
He stated, “The committee thinks that inflation will keep going down in the short term and will settle in the medium-term target band of 8 percent plus or minus two by the end of the year.”
Raising tariffs could lead to inflation
Asiama said that any increase in utility rates could cause new pricing pressures, which could make it harder to keep inflation under control, even though the prognosis is better. The MPC further said it will keep a careful eye on these concerns.
Lower credit costs for growth
The rate drop is also likely to make it easier for commercial lenders to give out loans, which will lower costs for businesses that are already having trouble with rising input prices.
Finally analysts say the choice shows that the government is trying to find a balance between encouraging growth and keeping prices stable.
