Ghana to Accommodate Cedi Strength, Curb Prices, Standard Chartered Says

Ghana’s central bank will allow the country’s currency, the cedi, to strengthen in the next year in order to slow inflation, according to Standard Chartered Plc.

“Ghana will become increasingly reliant on a strong exchange rate to keep inflation under control,” Razia Khan, the London-based head of research for Africa at the lender, wrote in an e-mailed note to clients sent today. “We believe the authorities will accommodate moderate strengthening of the cedi.”

The West African nation’s inflation rate fell from a five- year high of 20.7 percent in June 2009 to 9.38 percent in October after the cedi, which weakened 15 percent against the U.S. currency in the first half of 2009, was little changed in the past 12 months.

The slowdown in price growth enabled the central bank to cut the benchmark interest rate by 5 percentage points from November 2009 to July. The rate was left at 13.5 percent at the banks’ September meeting.

“Ghana’s interest-rate-easing cycle appears to have ended,” Khan said.

The Ghana cedi will strengthen to 1.37 against the U.S. dollar “on a one-year horizon,” Khan wrote. The cedi snapped four days of declines, appreciating 0.5 percent to 1.445 per dollar at 10:25 a.m. in Accra, according to data compiled by Bloomberg.

To contact the reporter on this story: Jason McLure in Accra at jmclure@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.