Ghana Cuts Key Lending Rate to 18% as Inflation Slows

By Emily Bowers

(Bloomberg) — Ghana’s central bank cut its benchmark lending rate for the first time in almost three years after the country’s currency pared losses, helping to slow inflation.

The prime rate was reduced to 18 percent from 18.5 percent, Bank of Ghana Governor Kwesi Amissah-Arthur told reporters today in the capital, Accra. It was Amissah-Arthur’s first rate- setting meeting since taking office on Oct. 1.

The inflation rate dropped to 18 percent in October, the fourth consecutive decline, the statistics service said on Nov. 13. Inflation has slowed from a five-year high of 20.7 percent in June after a loan of $1.02 billion from the International Monetary Fund halted a slump in the local currency. The cedi, which fell 15 percent against the dollar in the first half of the year, has rallied 4.3 percent since July 1.

“We expect that this will be only the first cut of a sustained easing cycle, with much more monetary policy stimulus still to come,” said Rhazia Khan, head of Africa research at Standard Chartered Bank.

In his 2010 budget speech on Nov. 18, Finance Minister Kwabena Duffuor said inflation would range between 15 percent and 16 percent by the end of the year.

“Inflation will continue to ease” to near the “upper part” of the bank’s target range to 14.5 to 17.5 percent by year end, Amissah-Arthur said. The rate cut “should be a major signal to the banks” to lower their lending rates.