The Economist Intelligence Unit (EIU) is forecasting that the Bank of Ghana will succeed in keeping inflation within its medium target of between 8-10 percent for at least the next three years.
According to the EIU in its latest country report, the consumer price index is not going to go beyond the 10 percent mark.
“We expect the BoG to manage to keep inflation within the official target band of 6-10% during 2020-23. However, with fiscal consolidation proceeding relatively slowly and domestic demand remaining robust, inflation will remain close to the upper bound of the target range, averaging 9.1% in those years,” the business advisory firm said.
Commenting on the central bank’s monetary policy, the EIU stated that there will not be any policy rate cuts in the remainder of the year owing to elevated inflationary pressures.
“In January 2019 the monetary policy committee of the Bank of Ghana reduced the policy rate by 100 basis points, from 17% to 16%. Inflation is forecast to remain elevated in 2019, moderating slightly to 9.6%, from 9.8% in 2018, suggesting that rates will not be cut further over the year,” said the EIU.
However, as inflation moderates further in 2020-21 and domestic demand growth weakens, there will be an
opportunity for the BoG to resume monetary policy easing.
This will be followed by renewed tightening in 2022-23, as domestic demand once again strengthens—driven by broader economic growth—and inflation picks up, the EIU predicted.