The monetary policy rate will reach its peak by March 2024 once inflation recedes sufficiently, GCB capital has disclosed.

It stated in its research update that the return to the path of fiscal consolidation, the continuously tight monetary policy stance, and the zero Central Bank deficit financing, among other reforms and favourable base effects, have supported the disinflation process thus far in 2023.

Both headline and core inflation have eased broadly from their respective peaks of 54.1% and 53.2% in December 2022 to 35.2% (-18.9% Year-To-Date) and 36.2% (-17% YTD) in Oct 2023.

“We expect the disinflation process to continue through 2024, all things being equal, supported by the tight monetary policy stance and the ongoing economic reforms. We envisage sharp declines in the headline over the next two inflation prints, going sub 30% for the November 2023 print and closing 2023 around 25% on the back of a favourable base drift”, it pointed out.

It added that both headline and core inflation could near 20% by February 2024, barring any seasonality-induced exchange rate and external shocks, “And we expect monetary policy to pivot by March 2023 in support of growth as inflation firmly assumes a downward path towards the medium-term target and low inflation expectations become entrenched”.

Macroeconomic environment stifles credit expansion

Furthermore, it said the challenged macroeconomic environment is stifling credit expansion as banks adopt a conservative credit stance amidst the elevated credit risk.

“Despite the better-than-expected growth outturn through half-year 2023 and the steady recovery in some leading indicators of economic activity, including the Bank of Ghana's Composite Index of Economic Activity (CIEA), growth remains depressed and below trend, with limited support through both policy and credit channels”, it mentioned.

Under fiscal consolidation and given the broad-based economic and structural reforms ongoing under the 3-Year IMF-supported programme, it alluded that fiscal and monetary support for growth is limited.