Ghana Cuts Key Rate By 200 Bps To 16%

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Friday, Ghana's central bank lowered its key interest rate by 200 basis points amid slowing inflation in a bid to boost credit in the economy.

The Bank of Ghana's Monetary Policy Committee reduced its Policy Rate by 200 basis points from 18% to 16%. This was the second rate cut in three years. In November, the central bank cut the rate by 50 basis points, the first reduction in nearly three years, as inflation began to slow.

"On the domestic scene, all the data point to steady diminishing inflationary pressures," the central bank governor Kwesi Amissah-Arthur said. Latest data from the Ghana Statistical Service showed that inflation dropped for the seventh month in a row in January, down to 14.8% from 15.9% in December. "The outlook is for steady disinflation towards the target range of 7.5 -11.5 percent for 2010," he added.

The results of the most recent surveys conducted last month show that the overall assessment of economic prospects by businesses and consumers are strongly positive, the Amissah-Arthur noted. The central bank expects local banks to respond to the latest rate cut by reducing their lending rates to boost credit growth in the economy and ensure a steady growth in output.

"Developments through the last quarter of 2009 and early 2010 suggest improved economic fundamentals driven by diminishing inflationary pressures, exchange rate stability, a pick-up in economic activity and an improvement in business and consumer confidence," the central bank said.

(Market News Provided by RTTNews)