MPC Decision: Which direction will BoG swing in 2025?

The Bank of Ghana's Monetary Policy Committee recently announced its decision to keep the Monetary Policy Rate unchanged at 27 per cent. Governor Ernest Addison shared his positive outlook for Ghana's domestic macroeconomic conditions, expecting stability, a return of inflation to the target band of 6 to 10 percent by the fourth quarter of 2025, and the continuation of the cedi's recent rebound due to reduced election-related uncertainties and improved foreign exchange reserves. However, in an interview on CNBC Africa, John Gatsi, the Dean of the University of Cape Coast School of Business, expressed concerns regarding the economic landscape and the challenges ahead. Gatsi highlighted the volatility of price development in the Ghanaian economy, citing the current inflation rate of 22.1 percent as a risk to monetary policy decisions. He emphasized the continued pressure from food inflation as a significant concern that needs to be addressed. Regarding the upcoming election in Ghana, Gatsi noted a general expectation for change among business stakeholders due to the existing burdens of high taxes, limited access to credit, and overall challenging business environment. While Governor Addison mentioned the easing election-related uncertainties, Gatsi pointed out the need for more substantial efforts to stabilize the macroeconomic front to support a more accommodating monetary policy. In terms of the economic agendas of the top contenders in the upcoming election, Gatsi highlighted the contrast between continuity and change. He mentioned the opposition's proposal for a '24-hour economy' focusing on continuous production across agriculture, industry, and manufacturing as a potential shift from the current government's approach. Gatsi indicated that the opposition's agenda includes initiatives such as training IT professionals and removing certain taxes, signaling a divergence in policy directions. As the election approaches, the economic outlook for Ghana remains a topic of discussion and speculation. The contrasting viewpoints on economic policies and the pressing issues related to inflation and currency stability pose significant challenges for the country's future economic direction.