The adjustment was made public by BoG Governor Dr. Ernest Addison during a press briefing following the Monetary Policy Committee’s (MPC) 122nd meeting.

Dr. Addison explained that the revised timeline was influenced by current economic conditions and ongoing structural challenges. He emphasized that achieving the new target would hinge on continued fiscal consolidation and adherence to the guidelines of the International Monetary Fund (IMF) programme. “Our forecasters are suggesting that we will reach single-digit inflation by the second quarter of 2026, as opposed to the original first-quarter forecast. However, this is contingent on the crafting and implementation of a robust economic policy agenda,” Dr. Addison stated.

The BoG’s mandate is to maintain inflation within a medium-term target band of 8±2 percent. However, inflationary pressures in 2024 have been persistent, largely driven by rising food prices. Climate-related factors, such as dry spells in key agricultural regions and delays in the onset of rains, severely affected food production, exacerbating inflation. Additionally, supply chain disruptions and fluctuations in currency value have compounded the problem.

Data from the BoG revealed a jump in inflation from 23.2 percent in December 2023 to 25.8 percent by March 2024. This was largely attributed to currency pressures and aggressive foreign reserve accumulation. However, inflation showed signs of easing by mid-year, dropping to 20.4 percent in August before climbing again to 23.8 percent by December, driven by rising food prices.

Dr. Addison noted that non-food inflation followed a more stable trajectory, declining steadily to 20.3 percent by the end of 2024, reflecting the positive impact of monetary policy measures on this category. “The most significant contributor to inflation was the fluctuation in food prices, which were notably volatile throughout the year,” he explained.

The election year in 2024 also introduced increased exchange rate volatility, fueled by market sentiment and speculative activities, further complicating efforts to manage inflation.

To stabilize inflation and address these structural challenges, the MPC decided to keep the policy rate at 27 percent. Governor Addison explained that this decision was in line with BoG’s broader strategy to control inflation and give time for fiscal and monetary policies to take effect. The BoG’s latest inflation forecast anticipates a gradual decline in inflation, with the target range of 8±2 percent expected to be met within the newly projected timeline.

Looking ahead to 2025, the disinflation process is expected to pick up, contingent on the new administration’s economic policy agenda and the 2025 budget, which has yet to be presented. Dr. Addison emphasized that fiscal discipline would be critical in achieving the inflation target, urging that the 2025 budget adhere to the parameters set under the IMF programme.

“The fiscal discipline that is necessary for achieving these goals will be crucial. If the 2025 budget adheres to IMF guidelines, we are optimistic that the inflation profile will align with the forecasts,” Dr. Addison said.

The Governor also pointed out that structural issues in food production, exacerbated by climate change and inefficiencies in supply chains and transport, remain significant drivers of inflation. With food prices continuing to be volatile, BoG anticipates further consultations with the IMF to refine its monetary policy under the IMF programme’s consultative clause.

Despite the challenges, Dr. Addison expressed optimism for future macroeconomic stability. He concluded by reaffirming that, with the right policies in place, the country could achieve its revised inflation target and restore a stable economic environment.