Ghana Holds Rate at 6-Year Low as It Warns of Currency Risk

ACCRA (Capital Markets in Africa) – – Ghana’s central bank maintained its benchmark interest rate at a six-year low, warning that it could tighten policy if inflation risks from a weaker currency materialize.

The Bank of Ghana kept the rate at 16 percent, Governor Ernest Addison told reporters Monday in the capital, Accra. All four economists in a Bloomberg survey forecast the unchanged stance.

After an unexpected rate cut in January on favorable inflation outcomes, the cedi accelerated its fall and was as much as 16 percent weaker against the dollar in early March for the year. The currency recovered some of those losses after the sale of $3 billion in Eurobonds last month was oversubscribedmore than six times.

Although exchange-rate pressures “have moderated significantly the full pass-through of recent depreciation to inflation remains to be assessed and there are risks to the outlook which will have to be monitored very closely,” Addison said. The MPC “will not hesitate to take decisive policy actions, including a tighter monetary policy stance, should these risks materialize and threaten to dislodge the disinflation process,” he said.

Price growth remains inside authorities’ target band of 6 percent to 10 percent, even though the rate increased in February from a record low the previous month.

The increase in the nation’s foreign reserves to $9.9 billion at the end of March will help to support the cedi, Addison said.

Source: Bloomberg Business News