Central Bank of Ghana unexpectedly does a 180 policy shift in March

New BOG governor surprises markets with policy turnaround: At its 25–28 March meeting, the Bank of Ghana (BOG) decided to raise its monetary policy rate by 100 basis points to 28.00%. The rise was the first since July 2023 and took markets by surprise as another hold had been anticipated. The decision was the first under new governor Johnson Pandit Asiama and was not unanimous.

“Uncomfortably high” inflation drives shift in policy: The key factor driving the Central Bank's hawkish turn was domestic inflation: Headline inflation is still a source of headaches for policymakers as it remains painfully elevated; both food and non-food inflation are “significantly above expectation” and core inflation remains high. Additionally, the BOG states that available data points to improved growth prospects and that the external sector outlook remained strong, despite heightened global uncertainty.

BOG keeps all cards on the table: The Central Bank’s communiqué was void of explicit forward guidance; the BOG stated it would reassess the impact of the latest increase before it reconvenes next on 21–23 May—with the decision to be announced three days later. Our panelists are currently reassessing their end-year policy rate forecasts.

Panelist insight: Analysts at Oxford Economics reflected on future policy moves: “The apex bank's decision reiterates its commitment to lowering inflation, which implies that additional rate hikes may be warranted if inflation does not moderate in the coming months. We think the bank's decision, coupled with increased currency stability, could reinstate a disinflationary process. If inflation declines enough in H2 2025, we predict a 100-bps cut in Q3 and another 100-bps cut in Q4.”

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