In brief
- Policy space narrows as external risks keep Bank of Ghana’s MPC on hold. The Bank of Ghana’s MPC unanimously retained the policy rate at 14.0% (as expected) but adopted a less dovish tone. The Governor’s emphasis on external conditions constraining the use of domestic policy space suggests limited scope for near-term easing. The Committee’s deliberations focused on inflation, external resilience and the interaction between fiscal operations in 4Q2026 and monetary policy with external sector risks seemingly being the dominant topic at the meeting.
- Decline in external buffers and expected fiscal spending complicate the FX outlook. The MPC sees inflation’s recent rise as largely contained but acknowledges growing upside risks as headline inflation approaches the target range “over the next few quarters”. This suggests a more measured climb in inflation and a 2027 return into the target band of 6.0% – 10.0%. Meanwhile, the weaker FX reserves highlight Ghana’s external vulnerabilities, with rebuilding of reserves targeted as a key priority in the months ahead. We believe this implies two likely outcomes: (1) Intensified GOLDBOD exports to boost reserves and (2) allowing greater Cedi flexibility. The expected rise in fiscal spending could also inject liquidity, lift demand and add moderate pressure on the Cedi, reinforcing the case for cautious monetary policy.
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