Ghana’s central bank lifted its key interest rate by more than expected — extending its steepest phase of monetary tightening — to ensure inflation decelerates at a faster pace.
(Bloomberg) — Ghana’s central bank lifted its key interest rate by more than expected — extending its steepest phase of monetary tightening — to ensure inflation decelerates at a faster pace.
The monetary policy committee raised the key rate by 150 basis points to 29.5%, Governor Ernest Addison told reporters in Accra, the capital, on Monday. None of the nine economists in a Bloomberg survey forecast an increase of that size.
The MPC has now hiked by 16 percentage points since November 2021 to stem an almost 50% slide in the cedi against the dollar because of concerns about its ballooning debt load, fanning inflation, which at 52.8% is more than five times the 10% ceiling of its target range. The inflation rate is projected to decline to 29% by year-end, Addison said.
“Inflation is too high,” he said. “From the macroeconomic perspective, we have to drive the rate of inflation down into single digits. That’s why the monetary policy has been raised to address the high level of inflation.”
The cedi maintained an earlier gain of 0.9% to trade at 12.0532 per dollar by 13:29 p.m. in Accra. The yield on Ghana’s $1 billion of eurobonds due 2026 fell 11 basis points to 52.22%.
Cheaper crude and a decision by the government to unilaterally stop payments on eurobonds and other external debt — pending an agreement with creditors that’s needed to unlock an International Monetary Fund bailout — has reduced dollar demand and helped steady the cedi this year.
Ghana, which had hoped to receive final approval for a $3 billion support package from the IMF this month, is now targeting an agreement by the end of April, Addison said.
–With assistance from Mark Evans, Yinka Ibukun and Rene Vollgraaff.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.