In brief
- The Monetary Policy Committee (MPC) of Ghana’s Central Bank was expectedly in a dovish mood at the September 2024 MPC meeting. However, the Committee was more bullish than our bull case as the stars aligned for continued stability of the Ghanaian Cedi amidst improving balance of payments position and a sustained disinflation. Against this backdrop, the MPC delivered a 200bps cut in the policy rate to 27.0%, sharper than our expected maximum cut of 150bps and the market’s anticipation of a 100bps reduction.
- Our analysis of the headline and core CPI revealed a faster moderation in underlying inflationary pressures than suggested by the headline inflation. This ostensibly boosted the MPC’s dovishness beyond our bull case for a rate cut. Our inflation forecast suggests a sharper decline for September (compared to the drop in August) and most likely widens the ex-ante real policy rate to 10.0% (vs the ex-post real policy rate of 8.6% in August). Judging from its forecast, we believe the MPC considered the double-digit ex-ante real policy rate as a strong case for a 200bps cut to restore the status quo of real policy rate around the 8.0% area.
- However, we are less convinced that the dovish policy tilt will immediately revive downward pressure on T-bill rates due to the Treasury’s elevated borrowing appetite which is underpinned by higher T-bill maturities and deficit financing needs.
- The updated monetary data from the MPC showed persistent rise in currency outside banks, which remains a key concern for us. The BOG Governor downplayed this risk, citing the strong growth in real output. However, we remain cautious ahead of election-related spendings in 4Q2024 funded with idle Cedi liquidity outside banks. In our opinion, the BOG’s launch of the Ghana Gold Coin also underscores the authorities’ realisation of the need to mop up extra Cedi liquidity using Gold’s store of value appeal to counter potential demand for FX and price pressures.
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