In brief
- The Bank of Ghana’s Monetary Policy Committee (MPC) did not surprise at its final meeting for 2024 as the authorities chose the path of caution over action by staying the policy rate at 27.0% (IC Insights: 27.0% | Market expectation: 26.75%).
- The MPC decision came against the backdrop of elevated inflation profile, post-US election policy uncertainty, and recent BOG-induced appreciation of the Ghanaian Cedi which blurred the near-term outlook. In view of this, we believe the MPC chose the optimal path which would allow the authorities to observe the evolution of Ghana’s election and political transitions (including the US) as well as the Cedi’s recent trend.
- The BOG’s updated inflation forecast showed a slightly elevated profile but remains a tad bullish on time horizon for single digit. While the MPC was silent on the updated forecast for end-2024, the Committee revealed a slight elevation in the one-year ahead average inflation to 20.1% (vs 19.0% at the September MPC meeting). As a result, the authorities observed that the horizon for attaining the single digit target has shifted forward to 4Q2025 (vs 3Q2025 prior). Similar to the BOG’s observation, our updated forecast for single digit inflation shifted forward by one quarter, albeit into 1Q2026, on account of the sluggish disinflation and earlier FX pressures.
- The Ghana gold rush and remittance inflows are holding up external account balances. We laud the Bank of Ghana’s decision to provide an update on its Gold Holdings as this enhances the credibility of the authorities’ Gold-for-Reserves programme and boosts our confidence. We note the impressive growth in the stock of gold held in Ghana’s forex reserves to 28.1 tonnes as of October 2024 (from 8.77 tonnes at the start of the programme in mid-2021). Per our estimation, this translates to USD 2.5bn, equivalent to about one-third of the gross forex reserves and almost half of the net forex reserves.
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