Fitch Solutions predicts that the Bank of Ghana will initiate a significant monetary easing cycle, reducing the policy rate by a total of 800 basis points to reach 22.00% by the close of 2024.
This projection is based on a considerable moderation of headline inflation, as indicated by the UK-based firm.
“With inflation moderating substantially through 2024, we anticipate that the BoG will embark upon a sizeable monetary easing cycle, cutting the policy rate by a cumulative 800bps to 22.00% by year-end.”
Fitch Solutions noted that the impact of interest rate adjustments on the real economy typically requires around 12 months due to the lag in monetary transmission mechanisms.
Consequently, the firm believes that the Bank of Ghana‘s dovish monetary policy stance is improbable to lead to a significant rise in real loan growth. This is particularly evident as real loan growth has persisted in contractionary territory from January to August 2023.
The Bank of Ghana increased the benchmark policy rate to 30.00% in 2021, a rise of 1,150 basis points. Access to corporate credit has been hampered as a result.
In the meantime, the Bank of Ghana’s Monetary Policy Committee will review economic developments during its 116th regular meeting, which will take place from Tuesday, January 23 to Friday, January 26.