(Bloomberg) -- Ghana lowered interest rates by more than expected after the pace of inflation slowed in the West African nation and is expected to cool further.
The monetary policy committee cut the key rate to 27% from 29%, Governor Ernest Addison told reporters at a press briefing in Accra, the capital, on Friday. None of the four economists polled by Bloomberg expected a reduction of that size. The cut is the steepest since March 2018.
Inflation is expected to continue to ease toward the central bank’s year-end goal of 13% to 17% and “steadily track towards the medium term target of 6% to 10% by the end of 2025 baring unanticipated shocks,” Addison said. Risks to the inflation outlook are assessed to be fairly balanced, he said.
The rate cut comes ahead of presidential elections on Dec. 7 in which Vice President Mahamudu Bawumia — the ruling New Patriotic Party’s candidate for the top job — is considered an underdog to opposition leader John Dramani Mahama amid public anger over the economy and high cost of living.
Still, annual inflation has now slowed for five consecutive months to 20.4% in August, from 25.8% in March.
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The cedi weakened 0.1% to 15.7655 per dollar at 11:38 a.m. in Accra. Ghana’s bond maturing in 2032 rose 0.2 cent to 53.31 cents on the dollar.
Alongside slower inflation, Ghana also posted economic growth of 6.9% in the second quarter, up from 4.8% in the previous three months. That was the strongest performance in five years and comes as it emerges from a lengthy debt restructuring after defaulting in 2022 and having to seek a $3 billion International Monetary Fund lifeline.
The “economy is doing well” and macroeconomic conditions have improved significantly,” providing room for the steep cut, said Addison.
Before Friday’s cut the MPC had kept the rate at 29% since January to to support the cedi and restrain price pressures.
--With assistance from Simbarashe Gumbo and Rene Vollgraaff.
©2024 Bloomberg L.P.
