In light of the continued economic recovery and inflationary problems, the Monetary Policy Committee (MPC) of the Bank of Ghana has announced that its benchmark policy rate will remain at 27 percent, indicating a cautious stance. This choice highlights the delicate balancing act needed to maintain economic momentum while controlling inflation concerns, as disclosed in the central bank's most recent news statement.
The Bank of Ghana's main instrument for influencing economic activity and managing inflation is the policy rate. It influences the cost of credit for both consumers and businesses by acting as the benchmark interest rate for lending and borrowing throughout the economy. A lower policy rate promotes economic growth by making credit more accessible, whereas a higher rate usually seeks to reduce inflation by discouraging borrowing.
Economic expansion and recuperation Thanks to strong activity in several important areas, Ghana's economy is still demonstrating resilience. After contracting by 0.4 percent during the same time the previous year, the real Composite Index of Economic Activity (CIEA) increased by 2.2 percent in September 2024. This upward trend has been fueled by increased port activity, an increase in construction projects, and better consumer demand.
The rate of inflation has increased somewhat in recent months, rising from 20.4 percent in August to 22.1 percent in October. The main causes of this increase are pass-through effects from previous currency depreciations and food costs. Nonetheless, core inflation—which does not include volatile goods like food and energy—has significantly decreased year over year, indicating the success of monetary policies. The Bank of Ghana has updated its inflation outlook in spite of these advancements. The fourth quarter of 2025 is now the new deadline for reaching its medium-term inflation objective of 6–10%.
Strength in the foreign sector and currency gains Price stability is possible because to a stronger Ghanaian cedi, which is supported by higher foreign exchange sales and better reserves. In November alone, the cedi recovered some of its earlier losses by increasing by 6% vs the US dollar. Significant progress has also been made in the nation's external sector, as evidenced by the $2.2 billion current account surplus in the first nine months of 2024, which was bolstered by strong remittance inflows and an increase in gold and oil exports. The increase in gross reserves to $7.92 billion covers imports for 3.5 months.
The Extended Credit Facility program of the International Monetary Fund is still on course. Following a favorable third review by the IMF board, Ghana is scheduled to receive an additional $360 million in December. It is anticipated that this infusion will further improve macroeconomic stability. Implications and prospects for policy With a strong cedi and successful policy actions anticipated to gradually bring the inflation trajectory into line with goals, the Bank is still committed to preserving economic stability at home.
In order to evaluate additional developments and decide on the next course of action, the MPC will meet again in January 2025.
