Introduction
The Bank of Ghana has announced a significant move to stimulate economic growth by reducing its main interest rate. The decision was made following a continuous decline in inflation over the past few months. Ghana, known for its production of cocoa, gold, and oil, has been facing its worst economic crisis in recent times. However, with the gradual easing of price pressures in the latter half of 2023, the country is looking to rebuild its economy and ensure long-term stability. Bank of Ghana Governor Ernest Addison provided further insights during a news conference, outlining the central bank’s inflation targets for the coming years.
Interest Rate Cut
Ghana’s central bank has lowered its main interest rate by 100 basis points to 29%, marking the first rate cut since 2021. This decision comes in response to a significant decrease in the country’s inflation rate for the fifth consecutive month in December. The move is a part of Ghana’s ongoing efforts to recover from its severe economic crisis, which pushed inflation rates well beyond 50% in late 2022.
Inflation Trends
Over the second half of 2023, Ghana experienced a notable reduction in price pressures. In December, the year-on-year inflation rate dropped to 23.2% from 26.4% in November and 35.2% in October. Such positive developments highlight the government’s commitment to implementing effective measures to stabilize the economy and lay the foundation for sustainable growth.
Inflation Forecasts
Bank of Ghana Governor Ernest Addison shared the central bank’s inflation projections during the news conference. According to officials, inflation is expected to continue its downward trajectory, reaching 13%-17% by the end of this year and further declining to 6%-10% by 2025. These figures align with the central bank’s inflation target of 8%, with a margin of error of 2 percentage points on either side.
By restructuring its debts and implementing prudent monetary policies, Ghana is making significant strides towards overcoming its economic challenges. The Bank of Ghana’s decision to lower the interest rate demonstrates its commitment to supporting the country’s economic recovery and fostering a conducive environment for investment and growth.