BoG projected to cut policy rate by 1% in next MPC meeting

The Bank of Ghana’s (BoG) Monetary Policy Rate (MPR) is expected to be reduced by 100 basis points – 1 per cent – from the current 14.5 per cent to 13.5 per cent in the Bank’s next Monetary Policy Committee (MPC) meeting in March.

This is according to a forecast by Fitch Solutions, the research arm of Fitch Ratings.

The 1 per cent reduction in the BoG’s policy rate Fitch Solutions notes, will be triggered by continuous decline in inflation and improved macroeconomic growth rate in the first quarter of 2021, coupled with further policy continuity by the current government resulting in steady recovery in domestic and international investor sentiments.

Fitch Solutions’ projection is supported by some analysts in the country who believe that the higher than anticipated deceleration of the country’s inflation rate into the BoG’s target band of 8+-10, is likely to provide strong support for a cut in the policy rate.

However, the analysts assert that the policy rate cut will be subject to the inflation rate recorded for February this year which faces risks from higher crude oil prices.

The policy rate cut is necessary to energize economic activity in the midst of a second Covid-19 wave currently being experienced by the country. Government is also believed to be keen on reducing costs of borrowing in the midst of rising public debts as evidenced by reductions in the cost of yields on its treasury bills.