The Monetary Policy Committee of the Bank of Ghana is expected to defer its next policy rate cut to the May 2024 monetary policy window.

According to GCB Capital, this is due to an increase in inflation to 23.5% in January 2024 from 23.2% in December 2024.

“According to our in-house projections, inflation would have inched higher to within 26% by the March 2024 MPC meeting, and we expect the Monetary Policy Committee to defer its next rate cut to the May 2024 monetary policy window, by which time inflation would have firmly returned to the path of disinflation”.

After five consecutive months of decline since August 2023, Ghana’s headline inflation unexpectedly reversed the trend, increasing by 30 basis points to 23.5% in January 2024.

While year-on-year food inflation continued to decline for the sixth consecutive month in January 2024, non-food inflation reversed the course, increasing by 180 basis points to 20.50% in January 2024 and underscoring the increase in headline inflation.

GCB Capital said it maintains its projection of at least three and at most four interest rate cuts in 2024 to between 24% and 26% by the end of 2024 as the Central Bank balances the risks to inflation and growth.

The BoG in January 2024 cut the Monetary Policy Rate to 29% in January 2029 from 30% in November 2023, with the direction of inflation pointing lower despite the simmering upside risks.

“We expect the monetary policy stance to remain cautious and appropriately tight”, it said.

The Governor of the Bank of Ghana attributed the cut in the policy rate in January 2024 to a steady decline in inflation from 54.0% in December 2022 to 23.4% in December 2023 though there were downside risks.

"The latest forecast suggests that the disinflation process will continue, and headline inflation is expected to ease to around 13-17% by the end of 2024, before gradually trending back to within the medium-term target range of 6-10% by 2025. These forecasts notwithstanding, there are upside risks to the inflation outlook and there is need for strict implementation of the 2024 budget and a tight monetary policy stance to sustain the disinflation process".