Policy rate cut unlikely this month – Reuters Poll

A poll of international financial and investment analysts conducted by Reuters is suggesting that the Monetary Policy Committee of the Bank of Ghana will still keep the prime rate stable at 16 percent at the end of its ongoing meeting.

Even as the MPC is currently meeting this week to make a decision on the benchmark rate, for the next two months – which will be announced on Friday, January 30 – a Reuter poll of the community of investment analysts suggests they believe the rate will be kept stable for now.

This decision is anticipated as the central bank focuses on inflation and waits to see how an initial U.S.-China trade deal pans out, the poll indicated

This will most likely be to the dissatisfaction of corporate Ghana, which has confidently been expecting a cut in the monetary policy rate at the end of this week.

Nevertheless, the Reuters poll agrees with the conventional view – including that of the Economist Intelligence Unit – that a cut in the MPR is expected during the year. But unlike the EIU and most of corporate Ghana, the majority of those polled by Reuters believe this will occur later in the year.

The poll suggests that rates will fall by 100 basis points to 15.0 percent – in line with the EIU’s expectations – this year even as it expects the economy to expand by 6.2 percent this year. It grew 5.6 percent, year-on-year, in the third quarter of 2019, well short of the 7.0 percent targeted by government, which itself is a downward revision from an original target of 7.6 percent. This year government is targeting growth of 6.8 percent.

The central bank already did some heavy lifting in easing rates over the past five years after a grueling International Monetary Fund austerity program. The benchmark MPR was in recent years one of the highest on the continent, touching a high of 26 percent in 2016.

“A temporary truce in the U.S.-China trade war and likely continued policy accommodation by global central banks would likely enable monetary policy moves by Africa’s major central banks to be more effective this year,” said Rafiq Raji, chief economist at Macroafricaintel.

“With reforms on the fiscal side in tandem, the continent would likely record better economic outcomes this year.”