Ghana’s MPC cuts MPR by 100bps to 29%

The Bank of Ghana's Monetary Policy Committee has made its first rate cut for this year, slashing its policy rate by 100 basis points to 29 per cent in a bid to sustain the inflation slowdown in the country. Yomi Mayomi-Akinola, Head of Research Division at Sarpong Capital, shared insights on the impact of this move. This rate cut came as a bit of a surprise to the market, although there was room for it given the persisting 30 per cent rate for most of 2023 and the levels of government and domestic borrowings. While inflation stood at 23.2 per cent in December, projections suggest it could drop to around 22 per cent in January, aligning with the Bank of Ghana's realistic expectation of reaching between 13 and 17 per cent for the year. The fiscal consolidation initiatives by the government, backed by inflows from international organisations like the World Bank and IMF, have improved the fiscal position and stabilized the currency to some extent. However, the impact on the Ghanaian Cedi is yet to fully materialize as the demand-supply gap persists. Despite growth concerns in the economy and the need to boost economic activity, the recent debt restructuring progress and inauguration of a private refinery hold promise for Ghana's economic future. While these developments offer some green shoots for the economy, it may take time before their full benefits are realized.