Ghanaians are likely to see another policy rate cut by the Bank of Ghana’s (BoG) Monetary Policy Committee (MPC) in September, should the disinflation trend continue.
The committee, in their individual decision after the last meeting, indicated that should the trend continue, another policy rate cut will be considered in the next sitting.
After this promise, the headline inflation for July dropped further to 12.1%, its lowest in nearly four years.
Most MPC members made it clear: if the downward trend in inflation continues, they would lower the policy rate again to stimulate growth and ease borrowing costs. July’s fresh data has now ticked that box. Some members even hinted at a “steeper lowering” if inflation slowed faster than expected.
That means the central bank’s key lending rate, already slashed by 300 basis points to 25% in July, could be headed even lower next month. For businesses and households, another cut would likely feed into cheaper credit, potentially spurring investment and consumption as the economy continues its fragile recovery from the 2022 debt crisis.
But the path to lower rates is not without obstacles. This period of the year traditionally brings heightened pressure on the cedi. Importers, anticipating the Christmas shopping season, ramp up foreign currency purchases to stock shelves with everything from electronics to food items.
That seasonal demand for dollars and other hard currencies often weakens the cedi, making imports costlier and posing a risk to the inflation trend.
Some MPC members have already flagged global and domestic risks that could complicate the picture. If a weaker currency sparks a rebound in imported inflation, the case for further cuts could weaken, or force the Bank to tread cautiously with the size of any reduction.
Despite the risk, inflation is firmly on a downward path, and the July data reinforces the MPC’s earlier conditions for more easing; the odds are tilted toward another rate cut in September.
The real question is not if, but by how much, and whether the seasonal cedi pressures can be managed without reversing the hard-won gains on prices.
If the Bank strikes the right balance, September could mark another turning point in Ghana’s journey from crisis stabilisation to sustainable growth.
