Economists at the Research Desk of Standard Bank, parent company of Stanbic Bank Ghana, are predicting a further reduction in this year’s BoG policy rate. This was contained in Standard Bank’s May, 2018 edition of The African Markets Revealed report; the Standard Bank predicts the central bank might cut the current policy rate by 300bps.

According to the report, the easing is warranted because of strong disinflation that is currently underway. “We expect the BoG to ease further this year, possibly cutting the policy rate by 300 bps. The bank’s easing bias is certainly warranted given the strong disinflation underway, with headline inflation dropping to 9.6% year-on-year in April from 10.4% year-on-year in March,” the report said.

The African Markets Revealed report further notes that the decline in headline inflation is due to the decline in non-food inflation. The report said: “Most of the recent decline in headline inflation is due to declining non-food inflation, which reached 10.6% year-on-year from 11.8% year-on-year in March. We expect the inflation trajectory to remain on the downside, with headline inflation bottoming out at 9.4% year-on-year in December before rising to 12.0% year-on-year by end of the first quarter in 2019”.


Speaking on the report, Head of Global Markets at Stanbic Bank, Afua Bulley, said the private sector and the economy as a whole will benefit when the policy rate is reduced further. “A reduction in the BoG’s policy rate also means a reduction in the lending rates of commercial banks. When this happens, businesses can access loans at relatively lower rates to grow their businesses. And when businesses grow, the economy grows as well,” she said.

The Bank of Ghana, earlier in April this year, introduced the Ghana Reference Rate (GRR) that forms the basis for pricing loans lent to the private sector. This was done to improve the transmission mechanism of its main policy levers. To that end, it – the GRR – is made up of the policy rate (40% weight), the 91-day Treasury bill rate (40%) and the overnight rate (20%).

The African Markets Revealed is a monthly report issued by the Standard Bank Group, parent company of Stanbic Bank Ghana, and focuses on the economic and financial outlook of African countries. The report also reviews current economic situations and makes short- to medium-term predictions about the economies of African countries.