ACCRA: Ghana's central bank cut its benchmark interest rate on Monday by 100 basis points to 20 percent, citing a drop in consumer inflation and the possibility of steady economic growth, governor Ernest Addison said.
The major commodity exporter this month raised its 2017 growth forecast to 7.9 percent from 6.3 percent on expected oil production, and 2018 growth is seen at 6.8, marking a turnaround of sorts for an economy that in the previous three years has averaged less than four percent.
It has undergone an International Monetary Fund loan programme to reduce its fiscal deficit and public debt and stabilise the volatile local currency.
"The indicators of economic activity and business and consumer confidence remain strong. Inflation expectations remain subdued with core inflation measures in line to achieving the medium term inflation objective," Addison said.
Ghana has an inflation target of 8 percent plus or minus 2 percent in 2018.
Addison said there were indications that Ghana's oil-induced growth was gaining momentum while the lower non-oil growth remain a concern that may require additional impetus to boost growth.
Monday's rate, although sizeable, was in line with analysts' expectations.
"Currency weakness may see the Bank of Ghana adopt a more cautious pace of easing going forward, but the overall direction of interest rates and the intent to boost private sector lending are both clear," said Razia Khan, Standard Chartered chief economist for Africa.
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