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Ghana's central bank lowered its monetary policy rate by a further 100 basis points to 17.0 percent on subdued risks to the inflation outlook and "while global and domestic developments do not yet pose a threat to inflation in the near term, recent changes in global financing conditions and its impact on emerging market asset classes requires some vigilance."


The Bank of Ghana (BOG) added its was "ready to take the appropriate policy measures to address any potential threats to the disinflation path."


The BOG has now cut its rate by 300 basis points this year and by 900 basis points since embarking on an easing cycle in November 2016.


Inflation in the west African nation dropped to 9.6 percent in April, the lowest since December 2012, and within the BOG's target range of 8.0 percent, plus/minus 2 percentage points.

Underlying inflation pressures have also been contained, with the main core inflation measure, which excludes energy and utility, fell to 10.4 percent in April from 12.6 percent in December.


Activity in Ghana's economy is supported by firmer prices of exports - oil, gold and cocoa - though BOG's leading indicator suggest a slower pace of growth in the first quarter of this year.


However, the central bank said it expects a gradual rebound over the medium term, supported by a favorable external environment and policy initiatives to boost growth, the stability of the Cedi's exchange rate, lower interest rates and disinflation.


"Although private sector credit growth remains below expectations, there are emerging sings of recovery evidence by increased new loan advances and easing credit conditions," BOG said.


Ghana's economy grew by an annual 8.1 percent in the fourth quarter of last year for 2017 growth of 8.5 percent, the fastest in five years due to higher oil and gas output.


Higher prices of exports have translated into positive trade and current account balances and Ghana's Gross International Reserves rose to US$8.1 billion as of May 17, up from $6.9 billion on March 20, helped by funds from the recent Eurobond issue that raised US$2 billion, well in excess of the government's initial expectations of raising $750 million.


Based on the strong external payments position, improved fundamentals and liquidity, BOG said the foreign exchange market had remained strong, with the cedi's effective exchange rate down 0.9 percent over the first four months of the year showing "the cedi remains competitive and broadly aligned with the underlying fundamentals."


Against the stronger U.S. dollar, the cedi has weakened in the last two months and was trading at 4.6 to the dollar today, down 1.3 percent this year.

 

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