Headline inflation is expected to ease between13% to 17% by the end of 2024, according to the Bank of Ghana (BoG).
The Central Bank says the expectation was as a result of inflation declining sharply by more than 30% in the course of 2023.
It is also expected to trend back gradually to within the medium-term target range of 6-10 percent by 2025.
This was announced by the Governor of the Bank of Ghana, Dr. Ernest Addison, during the 116th Monetary Policy Committee (MPC) in Accra, on Monday, January 29, 2024.
These forecasts, he said, were likely to see upside risks to the inflation outlook and there was
need for strict implementation of the 2024 budget and a tight monetary policy stance to
sustain the disinflation process.
Addressing the media, the Governor said several factors have supported the disinflation process, namely “the tightening monetary policy stance throughout 2023, favourable international crude oil prices which led to stable ex-pump prices and transportation cost and relative stability in the
exchange rate.”
On the monetary policy rate, the committee noted the emerging recovery, but found the need to maintain a strong policy stance to consolidate the disinflation gains.
Under these circumstances, the Committee decided to reduce the Monetary Policy Rate by 100 basis points to 29 percent.
According to him, the decision was taken following a steady decline in inflation from 54.0% in December 2022 to 23.4% in December 2023, though there are downside risks.
The Governor further indicated that the Committee noted that global growth had remained relatively subdued in 2023, while the ease in global inflation had triggered a pause in monetary
policy tightening across key economies.
“Declining energy and food prices, together with tight monetary policy have exerted downward pressures on headline inflation. Although major central banks have paused on their policy rate hikes due to declining inflation, global financing conditions remain tight as the past effects of the restrictive policies continue to keep borrowing costs high,” he added.
The global outlook, he said, remains uncertain with geopolitical tensions and its potential spillovers to the commodities markets acting as a major risk factor to most economies.
On the domestic economy, the governor continued that there are clear indications that the current
Macro-economic framework being implemented with the support of the IMF-ECF programme is yielding positive results.
However, Dr. Addison noted that both headline and core inflation were declining and projected to decelerate further.
On the money market, interest rates broadly trended downward at the short end of the yield curve.
The 91-day and 182-day Treasury bill rates decreased to 29.49% and 31.70% respectively, in December 2023, from 35.48% and 36.23% respectively, in the corresponding period of 2022.
Similarly, the rate on the 364-day instrument decreased to 32.97% in December 2023 from 36.06% in December 2022.
Dr. Addison emphasised that the banking sector remains stable, despite the elevated credit
risks.
Also, he added again that the bank’s liquidity and profitability positions have improved in the aftermath of the domestic debt restructuring and the Bank was closely monitoring the capital restoration efforts of the banks in line with approved plans, including through support from the Ghana Financial Stability Fund.
However, it was expected that early recapitalization and effective risk management by banks will help promote overall banking sector stability and resilience and ensure effective financial intermediation to strengthen the economic recovery efforts.
“The country’s external buffers have increased, providing support for exchange
rate stability. Improved forex inflows from the IMF-ECF disbursements, receipt of the cocoa
syndicated loan, and expected funding from the World Bank’s Development Policy Operations are expected to improve foreign exchange inflows,” he stated.
In addition, he was optimistic that the gold for reserve programme of the Bank, repatriation of foreign exchange from the mining and oil companies and reduction in debt service payments would further support reserve build-up and improve the external sector outlook.
