Ghana's policy rate decision too close to call as inflation alters course

Economists are divided over whether Ghana’s central bank will extend its easing cycle or leave the key interest rate unchanged ahead of elections next month.

Of the six economists polled by Bloomberg three expect the monetary policy committee to hold the benchmark at 27% when it delivers its final rate verdict of the year on Friday and the rest anticipate a cut of 50 to 100 basis points.

Those expecting the MPC to stand pat foresee it doing so on concerns over the inflation trajectory. Annual inflation quickened for a second straight month in October to 22.1%, putting its year-end target of 18% in jeopardy.

“I expect inflation to end the year around 22% and disinflation to resume in 2025, supporting the case for the MPC to leave rates on hold to steady underlying price triggers, said GCB Bank Plc’s Courage Boti. It’s already delivered 300 basis points of cuts this year, a necessary stimulus for economic growth which is quite robust and “so there may not be any pressure to do more,” he said.

Ghana’s economy grew 6.9% in the second quarter — its fastest pace in five years.

Factors that may convince the MPC to cut include the positive inflation-adjusted interest rate and the nation’s improved economic outlook, said Leeuwner Esterhuysen, senior economist at Oxford Economics.

The nation recently concluded its eurobond debt rework, prompting Fitch Ratings to assess the notes as out of default and a Moody’s Ratings upgrade.

Ghana also reached a staff-level agreement with the International Monetary Fund last month to receive another $360 million under its current three-year program. Ghana sought IMF help after it could no longer service its loans and kicked off a debt-restructuring in December 2022.

Still, the MPC may want to leave interest rates on hold “not to generate any noise between now and Dec. 7” elections, Boti said.

Accra-based Global InfoAnalytics Ltd.’s latest survey shows opposition leader John Mahama winning 51.9% of the vote and the ruling New Patriotic Party’s candidate Vice President Mahamudu Bawumia 40.5%.