Fitch Solutions projects that the Bank of Ghana (BoG) will reduce its policy rate by 7% by 2025, bringing it to 20%.
The forecasted cut is anticipated as the average inflation rate in Ghana is expected to decrease to 16.2% in 2025, down from a projected 22.1% in 2024.
This improvement is attributed to anticipated enhancements in Ghana’s foreign exchange market.
Fitch Solutions also noted that global monetary easing, particularly by the US Federal Reserve, could enable the BoG to lower its rates without risking significant capital outflows.
However, the agency warned of potential risks to its forecast, including prolonged debt restructuring negotiations that could impact investor confidence and pressure the Ghanaian cedi, potentially leading to sustained inflationary risks.
In the short term, Fitch Solutions anticipates a 2% cut in the BoG’s policy rate in November, during the final Monetary Policy Committee (MPC) press briefing of the year, bringing it down to 27%.
This follows the BoG’s decision to maintain the rate at 29% during its July 26 meeting due to uncertainties around inflation, exchange rate fluctuations, and rising utility prices.
The agency expects inflation to trend downward, falling below 20% by September, and anticipates some recovery in the cedi’s value post-restructuring of Ghana’s Eurobonds, which began in June and is likely to conclude in September.
Fitch Solutions predicts that the BoG will likely keep the policy rate unchanged at its September MPC briefing due to ongoing price pressures and intense economic activity, with a potential rate cut to follow in November.
