BOG May Cut Lending Rate as Inflation Slows

Ghana’s central bank will probably reduce its benchmark interest rate tomorrow, the third cut since November, after the inflation rate fell to the lowest in more than two years.

The key lending rate will be lowered to 15 percent from 16 percent, according to three of six economists surveyed by Bloomberg, while one forecast a 2 percentage-point cut and another a 0.5 to 1-point reduction. One analyst expected rates to be left unchanged. The decision will be announced in the capital, Accra, soon after 11 a.m.

A “favorable inflation outlook supports the easing of monetary policy,” Yvonne Mhango, Johannesburg-based head of Africa research for Standard Bank, said in an e-mail. Mhango forecast a two percentage-point cut in the lending rate. The inflation rate fell to 13.3 percent in March, the lowest since February 2008 and compared with a five-year high of 20.7 percent in June. The central bank plans to reduce its lending rate ”gradually” as inflation eases further, Deputy Governor Millison Narh said March 30. A day later, Governor Kwesi Amissah-Arthur said inflation is likely to end the year between 9.2 and 9.5 percent.

Consumer-price growth has slowed after Ghana’s currency, the cedi, halted its decline against the U.S. dollar last year. After falling 15 percent in the first six months of 2009, the cedi has gained 5.3 percent since July.

Slowing inflation prompted Amissah-Arthur to make the central bank’s first rate cut in almost three years in November, lowering it by 50 basis points to 18 percent. A second cut to 16 percent followed in February in an attempt to get commercial banks to lower their own lending rates.

On March 31, Amissah-Arthur said average bank rates fell from 37 percent to about 32 percent following the February cut and that he would like to see lenders cut their rates more.