BoG’s policy rate cut could have been deeper; 100bps cut conservative, says GCB Capital Research

GCB Capital Research highlights that the recent policy rate reduction by the Bank of Ghana (BoG) could have been more aggressive if not for burgeoning upside risks to inflation.

Despite the inclination towards a deeper cut, the BoG’s Monetary Policy Committee (MPC) took a cautious stance, citing various factors anchoring the disinflation process. These include the current stringent policy stance, stable Cedi performance, and favorable trends in crude oil prices.

The MPC remains optimistic about the continued disinflation trajectory, even in the face of potential inflationary pressures.

Projections suggest a gradual decline in headline inflation to 15%±2% by the end of 2024, with a subsequent return to the medium-term target range of 8%±2% by 2025.

However, GCB Capital Research argues that the 1% rate cut appears conservative given the acknowledged inflation risks.

The MPC’s strategy relies heavily on maintaining a judiciously tight monetary policy stance and ensuring rigorous implementation of the 2024 fiscal budget to mitigate inflationary concerns.

The MPC’s cautious approach underscores its commitment to balancing the imperative of stimulating economic growth with the need to manage inflationary pressures effectively.

This prudent stance reflects the BoG’s unwavering dedication to preserving price stability while fostering sustainable economic expansion amidst evolving macroeconomic dynamics.

The Bank of Ghana (BoG) has reduced its Monetary Policy Rate (base rate) to 29 percent.

The reduction indicates a 100 basis points decline in the apex bank’s prime rate from the previous policy rate of 30 percent.

Source:noranreports