Ghana Central Bank Holds Benchmark Interest Rate at 16%

The Bank of Ghana left its benchmark interest rate unchanged for a third meeting and said a new platform for currency trading will increase transparency.

The key rate was maintained at 16 percent, Governor Kofi Wampah told reporters in the capital, Accra today. That was in line with the forecasts of four of the eight economists surveyed by Bloomberg. The rest predicted an increase of as much as 1 percentage point.

The cedi rose as much as 1.7 percent, the most since Nov. 19, and was trading 0.4 percent stronger at 2.275 per dollar at 16:35 p.m. in Accra, paring the year’s decline to 16 percent.

Inflation accelerated to 13.1 percent in October, the fastest pace in more than 3 1/2 years, after the government ended subsidies for fuel and raised tariffs for water and electricity to curb a budget deficit. The central bank raised the interest rate by 1 percentage point in May to support the cedi.

“The committee held the view that the upside risks to inflation, though elevated, are mainly structural and therefore may not be addressed by a policy rate adjustment at this time,” Wampah said. “On the other hand, there are no significant risks to growth.”

Economic Growth

West Africa’s second-largest economy will expand 8 percent next year, faster than the estimated 7.4 percent this year, Finance Minister Seth Terkper said last week in a budget speech. The government will target narrowing the budget gap to 8.5 percent of gross domestic product next year from 10.2 percent this year, he said.

“The continued improvement in the energy sector, expected increases in oil production and the onset of gas processing will support growth in 2014,” Wampah said.

The bank will introduce a new system for foreign exchange trading this year and will propose a supporting code of conduct next week that will be implemented next year, Wampah said.

“We need to introduce a transparent way of dealing on the market,” he said. The code of conduct “will bring more transparency.”

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