John Kwakye welcomes cut in policy rate to 27%

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An economist and Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye has welcomed the decision by the Monetary Policy Committee (MPC) of the Bank of Ghana to cut the policy rate from 29 percent to 27 percent.

He says he had always called for a reduction in the rate given the drop in inflation.

“I welcome the reduction in the PR from 29% to 27%. I have long called for a cut of at least 200 basis points in line with the sharp drop in inflation during 2022-24 from 54% to 20% and also because the PR is unjustifiably and prohibitively high,” he wrote on his X plage on Friday, September 27.

Explaining the decision to cut the rate at the 120th MPC press conference on Friday September 27, the chair of the MPC Dr Ernest Addison said that the domestic economy continues to recover.

“Macroceconomic conditions have generally improved, growth picked up, headline inflation dropping, monetary conditions remain tight, disinflation process is on the course,” he said.

He stated that in the assessment of the Committee, preliminary data since the last MPC meeting held in July 2024 indicates that macroeconomic conditions have generally improved.

Headline inflation has eased, and growth has `picked up. Fiscal policy implementation has been robust, providing impulse that is supportive of growth, while monetary conditions have remained tight and supportive of the disinflation process.

Headline inflation, since the first quarter, has declined for 5 consecutive months by 5.4 percentage points. Core inflation has also declined sharply over the same comparative period by 6.9 percentage points. These trends suggest that the disinflation process is on course. The latest
forecasts show that inflation will continue to ease towards the range target of 13-17 percent for the year and steadily track back towards the medium-term target of 6-10 percent by the end of 2025, barring unanticipated shocks. At the current juncture, the committee judged the risks to inflation outlook as fairly balanced.

“Given these considerations, the Committee decided to lower the Monetary Policy Rate by 200 basis points to 27.0 percent,” he said.

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