Fitch Solutions has indicated that the Bank of Ghana (BoG) will cut its benchmark policy rate by 200 basis points (bps) to 27.00% by end-2024.

This is higher than its earlier projection of 25.00%. 

The Central Bank decided to keep the key policy rate on hold at 29.00%, at the most recent monetary policy committee (MPC) meeting on July 26, 2024, citing 'uncertainty regarding the inflation path' caused by recent exchange rate weakness and rising fuel and utility prices.

The UK-based firm said although this decision aligned with its expectations, the significant depreciation of the cedi and the BoG's hawkish tone have prompted it to revise it end-2024 forecast upward from 25.00% prior.

It however stated that “We anticipate that the BoG will leave the policy rate unchanged at the upcoming MPC meeting in September for two key reasons”. 

First, it pointed out that while inflation will come down in the coming months, underlying price pressures will persist.”

“We project that consumer price growth will moderate to 20.7% year-on-year in August—the last inflation print before the September MPC meeting— down from 22.8% in June. However, inflation readings will remain higher than what central bank policymakers are comfortable with, driven by the ongoing effects of exchange rate weakness and rising food prices.

Second, it stressed that economic activity will remain robust, reducing the need to adopt a more accommodative monetary policy stance. 

“Real Gross Domestic Product growth accelerated sharply to 4.7% year-on-year in quarter one 2024—from 3.8% in quarter 4 2023—marking the fastest economic expansion in over two years. We anticipate that quarter 2 economic growth, which will be released prior to the September MPC meeting, will also surpass the Bank of Ghana's full-year forecast of 3.7%, driven by strong domestic demand”.

It continued that “We think that the BoG will implement a 200bps-cut at the last MPC meeting of the year in November [2024], bringing the key rate to 27.00%. Although inflationary pressures remain more persistent than the central bank would like, we believe it will remain on a downward trend, falling below 20.0% by September".