The Ghana Association of Banks (GAB) is optimistic about a potential cut in the monetary policy rate as the Bank of Ghana’s (BoG) Monetary Policy Committee begins its 123rd meeting today, Monday, March 24, 2025.
With the policy rate currently at 27% and inflation moderating to 23.1% in February, GAB President Kwamina Asomaning believes there is a strong case for a rate cut.
Speaking to the media on the sidelines of the Association’s 2025 Cocktail and Networking Session, he pointed to stabilizing market conditions, a steady local currency, and a slowdown in food price increases as key factors that could influence the BoG’s decision.
The policy rate we believe follows the inflation rate. Inflation has stayed around 23%. The pace of disinflation has been a lot slower over the last few months as compared to how we will have it. What market watchers are looking to see is whether the expectation for inflation would have dropped enough for the policymakers to make a move.
“We feel that just giving some of the sentiments…we have seen the currency has stabilized and the food drought while it is still not behind us, we have also gotten indication that the rate of increase of food prices has moderated.
“To the extent that the policymakers are comfortable that expectations have tempered, we feel there is a basis for that policy rate to come down. Invariably, the policy rate affects interest rates and so if that rate doesn’t come down, interest rate will remain high. The economy needs a bit of a respite so we are quite hopeful,” Asomaning stated.
The policy rate significantly impacts interest rates in the economy thus a cut would provide relief to businesses and consumers who face high borrowing costs.
The 123rd MPC meeting, the first under new Governor Dr. Johnson Asiama, will run from March 24 to March 26, 2025, to assess key economic developments. The meeting will conclude with a press conference on Friday, March 28, 2025, where the committee will announce its decision.
Market watchers are keenly observing whether inflation expectations have eased enough for the BoG to adjust its stance.
The development also comes amidst a further drop in Treasury Bill rates, alongside the improving economic environment, strengthening the case for a policy rate cut.
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