Ghana’s central bank hiked on November 16 its monetary policy rate by another 100bp to 26%, saying that although inflation has stabilised, it remains well outside the medium term target band of 8%±2% and risks remain tilted to the upside.
“Assessments of current economic conditions show that though monetary policy remains tight, some additional tightening is required to re-anchor the displaced inflation expectations,” the Bank of Ghana (BOG) said in a statement, adding that the ongoing fiscal consolidation should help “break the high inflation inertia”.
Continuing inflationary pressures, triggered by sharp currency depreciation, have prompted the BOG to hike its policy rate by a total of 200bp this year (100bp in May and 100bp in September) after lifting it by a cumulative 500bp last year.
On a year-to-date basis, the local cedi currency depreciated by 15.5% as at October, compared to a 31.2% weakening in the same period last year. The relatively better performance has been supported by the International Monetary Fund’s $918mn 3-year economic programme, which has helped the West African country win back some investor confidence after low commodity prices and inadequate power supply hurt growth and led to fiscal slippages.
Ghana’s inflation stabilised at 17.4% in September and October after falling to 17.3% in August from a nearly 6-year high of 17.9% in July. However, the central bank warned that “without any additional policy adjustment, inflation is likely to drift farther away from the target band and lengthen the forecast horizon into late 2017”.
At the end of October, Ghana’s gross foreign assets stood at $5.7bn, equivalent to 3.4 months of imports, BOG disclosed. The country’s nine-month current account gap was equal to 5.4% of GDP.
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