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The Bank of Ghana has lowered its benchmark interest rate by 50 basis points to 25.5 per cent as the country’s inflation moderates, according to a statement released on Monday.

Earlier this month, the Ghana Statistical Service reported that the country’s Consumer Price Index fell to 15.8 per cent in October from 17.2 per cent recorded in September due to a decline in non-food inflation. (Inflation had peaked at 19.2 per cent in March this year).

“The inflation outlook remains positive. Barring any major price shocks, the forecast remains broadly unchanged and inflation is expected to return to the medium-term target band in 2017,” Abdul-Nashiru Issahaku, Governor of the Bank of Ghana, said. “The current tight policy stance and exchange rate stability should further support the disinflation process.”

The BoG’s decision is the first interest rate reduction since July 2011. The decision may help spur commercial activities, which have been subdued by high borrowing costs, according to Reuters.

“The Bank’s business and consumer confidence surveys both show improved business and consumer sentiments, though with a marginal uptick in inflation expectations,” Issahaku said.
 
In September, Ghana’s statistics agency said economic growth slowed to 2.5 per cent in the second quarter of 2016 compared with 4.9 per cent posted in the previous quarter. The agency attributed the slowdown in GDP growth to a halt in oil production caused by a technical fault at the country’s main production vessel – FSPO Kwame Nkrumah.

“Growth has remained subdued for the most part of 2016 largely due to tight credit conditions and the downturn in commodity prices,” Issahaku said.

Since April last year, Ghana has been implementing a $1 billion three-year programme designed by International Monetary Fund to check the sliding cedi, rising inflation, and tackle the country’s growing debt. The West African country will hold general elections next month, with President John Dramani Mahama vying for a second term in office.