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Ghana May Hold Key Rate as Cedi Gain Eases Inflationary Pressure

Ghana’s central bank will probably keep its benchmark rate unchanged after the local currency stemmed a decline, helping to ease pressure on inflation in West Africa’s second-biggest economy.

The Bank of Ghana, led by acting Governor Kofi Wampah, is expected to hold its policy rate at 15 percent, according to six economists surveyed by Bloomberg. One analyst expects a cut of 50 basis points. The decision will be announced at 11 a.m. tomorrow in Accra, the capital.

The bank raised the key rate by 2.5 percentage points this year, increased Treasury-bill sales and ordered lenders to hold reserves in the local currency in a bid to shore up the cedi, which has weakened 14 percent against the dollar since January. The currency strengthened 1.1 percent in August, its first monthly gain this year, according to data compiled by Bloomberg.

“Given that the cedi has stabilized and even appreciated lately, the need for an incremental policy rate hike has reduced,” Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said in an e-mailed response to questions yesterday. “Inflation remains in single digits and increased only marginally in recent months.”

Consumer prices were little changed at 9.5 percent in July from 9.4 percent a month earlier. If August inflation, which will be released an hour before the monetary policy decision, slows to below 9 percent, the bank may decide to lower the lending rate to 14.5 percent, Angus Downie, head of economic research at Ecobank Transnational Inc., said by phone yesterday.

“I think we will see a small rate cut based on the combined factors of slowing inflation and the appreciation of the cedi, despite pressure building up on the fiscal side,” he said.

In July, Finance Minister Kwabena Duffuor raised his 2012 budget deficit target to 6.7 percent of gross domestic product from 4.8 percent as fuel subsidies and wage increases for civil servants leads to higher expenditures than earlier forecast.

To contact the reporter on this story: Pauline Bax in Accra at pbax@bloomberg.net

To contact the editor responsible for this story: Emily Bowers at ebowers1@bloomberg.net

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