Fitch Solutions has projected that the Bank of Ghana (BoG) will lower its benchmark policy rate by 200 basis points to 27.00% by the end of 2024. This revised forecast is an increase from the firm's earlier prediction of 25.00%. At the most recent monetary policy committee (MPC) meeting on July 26, 2024, the Central Bank decided to maintain the key policy rate at 29.

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00%, citing "uncertainty regarding the inflation path" due to recent exchange rate volatility and rising fuel and utility costs. Although this decision was anticipated by Fitch Solutions, the significant depreciation of the cedi and the BoG's cautious stance prompted the firm to adjust its end-2024 forecast upward from the previous 25.00%.

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Fitch Solutions stated, "We anticipate that the BoG will leave the policy rate unchanged at the upcoming MPC meeting in September for two key reasons." Firstly, the firm noted that while inflation is expected to decrease in the coming months, underlying price pressures will persist. "We project that consumer price growth will moderate to 20.7% year-on-year in August—the last inflation print before the September MPC meeting—down from 22.

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8% in June. However, inflation readings will remain higher than what central bank policymakers are comfortable with, driven by the ongoing effects of exchange rate weakness and rising food prices." Secondly, Fitch Solutions emphasized that robust economic activity reduces the necessity for a more accommodative monetary policy. "Real Gross Domestic Product growth accelerated sharply to 4.7% year-on-year in quarter one 2024—from 3.

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8% in quarter 4 2023—marking the fastest economic expansion in over two years. We anticipate that quarter 2 economic growth, which will be released prior to the September MPC meeting, will also surpass the Bank of Ghana's full-year forecast of 3.7%, driven by strong domestic demand.

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" Fitch Solutions concluded, "We think that the BoG will implement a 200bps-cut at the last MPC meeting of the year in November [2024], bringing the key rate to 27.00%. Although inflationary pressures remain more persistent than the central bank would like, we believe it will remain on a downward trend, falling below 20.0% by September." The projected cut in the Bank of Ghana’s (BoG) benchmark policy rate by 200 basis points to 27.

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00% by the end of 2024 could have several implications for the Ghanaian economy, particularly in the areas of business, loans, and interest rates. Lower interest rates generally reduce the cost of borrowing, which can encourage businesses to take out loans for expansion and capital investments. This can lead to increased business activities, higher production levels, and potentially more job creation.

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With lower borrowing costs, consumers may find it cheaper to finance purchases of goods and services. This can lead to increased consumer spending, which in turn can boost business revenues and economic growth. For businesses already servicing debt, a reduction in interest rates can lower their interest expenses, improving their profitability and cash flow. This can free up resources for further investment or operational improvements.

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