Ghana Cuts Key Rate to Three-Year Low as Inflation Slows

Updated on
  • Central bank sees inflation in target by second quarter 2018
  • Economic growth is rebounding after last year’s slowdown
Road traffic passes business advertisements for Zenith Bank Plc and MTN Group Ltd. sit on a busy highway in Accra, Ghana. Photographer: Ty Wright/Bloomberg

Ghana cut its benchmark interest rate to the lowest in more than three years as inflation slows toward the central bank’s target.

The Bank of Ghana reduced the rate to 20 percent, Governor Ernest Addison, told reporters in the capital, Accra, on Monday. Of the eight economists surveyed by Bloomberg, four forecast the move.

Ghana will meet the inflation target of 6 percent to 10 percent “at worst” by the second quarter of next year, Addison said.

West Africa’s second-largest economy is rebounding from the slowest growth in more than two decades in 2016 and looser monetary policy could support this. While the inflation rate is at the lowest in more than four years, a weaker cedi, which has lost 11 percent this year, is a threat to the price outlook.

“The indicators of economic activity and business and consumer confidence remain strong,” Addison said. “Inflation conditions remain subdued.”

The key rate has been lowered by 550 basis points since March. While inflation still exceeds the central bank’s target band, it has slowed from a peak of 19.2 percent in March 2016 to 11.6 percent in October.

The cedi weakened 2.4 percent to 4.625 per dollar at 11:45 a.m. in the capital.

(An earlier version of this story was corrected to show the interest rate is at the lowest in more than three years.)

— With assistance by Simbarashe Gumbo

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