Ghana expected to lower interest rates for the first time in eight months

Ghana is expected to lower interest rates for the first time in eight months after the pace of inflation slowed in the West African nation and is expected to cool further.

The central bank is forecast to lower rates by 100 basis points to 28% when the monetary policy committee delivers its decision Friday, according to four economists surveyed by Bloomberg. It would be the first cut since January.

“The Bank of Ghana can now afford to cut the policy rate, given that the Fed has cut its interest rates and Ghana also experienced consistent disinflation for more than four months,” said Agyapomaa Gyeke-Dako, a senior lecturer in economics at the University of Ghana Business School. “I expect a cautious 100 basis points cut.”

Officials had maintained their policy stance to support the cedi and restrain price pressures. But the annual rate of inflation has now slowed for five consecutive months to 20.4% in August, from 25.8% in March.

Alongside slower inflation, Ghana also posted economic growth of 6.9% in the second quarter, up from 4.8% in the previous three months. That was the strongest performance in five years and comes as it emerges from a lengthy debt restructuring after defaulting in 2022 and having to seek a $3 billion International Monetary Fund lifeline.

The central bank has previously said it sees inflation at between 13% and 17% by year end.

“There is scope to cut the rate at this meeting by 50-100 basis points because inflation will likely continue slowing in September and October, helped by a high base effect and firmer cedi. Real rates are also high at 9%, giving policymakers room to cut,” said Yvonne Mhango, Africa economist with Bloomberg Economics. “However, from November the high base effect falls away, lowering the chances of a cut at subsequent rate meetings if the central bank wants to maintain high positive real rates.”