New Bank of Ghana Boss Cuts Borrowing Costs at First MeetingBy
Key interest rate at lowest level in almost two years
Inflation expected to slow toward the target, Addison says
Ghana’s new central bank governor cut the benchmark interest rate to the lowest level in almost two years to help spur economic growth as inflation pressures ease.
The Bank of Ghana reduced its key rate to 22.5 percent from 23.5 percent, Governor Ernest Addison told reporters in Accra, the capital, after chairing his first meeting of the Monetary Policy Committee since replacing Abdul Nashiru Issahaku early last month. That’s the lowest rate since July 2015. Five out of eight economists in a Bloomberg survey forecast a cut and the rest predicted borrowing costs will stay unchanged.
The central bank reduced its key rate in November for the first time in more than five years even as inflation has been outside the central bank’s target band since at least January 2013. Consumer-price growth was 13 percent in April compared with a peak of 19.2 percent last March. While the cedi has recovered from the record low it reached in March after markets were startled by the discovery of previously unknown government spending, the currency was the world’s worst performer in the past month.
“Volatility in the foreign-exchange market observed at the last MPC meeting has eased,” Addison said. Inflation is expected to trend toward the target of 6 percent to 10 percent in 2018, “barring any unanticipated shocks,” he said.
The government of President Nana Akufo-Addo, who came to power after winning a December vote, has vowed to boost economic growth, which fell to the lowest rate in 26 years in 2016. Finance Minister Ken Ofori-Atta announced tax breaks and increased state spending in his budget as part of plans to support private sector-led expansion.
“The economy will see a boom because the private sector can borrow at lower rates to boost productivity,” Eliezer Fummey, a research analyst at NDK Capital Ltd. in Accra, said by phone. “There will be sufficient foreign-exchange inflows. The cedi will not be depreciating.”
The currency weakened 0.1 percent to 4.41 per dollar by 3:08 p.m. in Accra, extending its decline since the start of the year to 6.8 percent.
— With assistance by Simbarashe Gumbo, and Andre Janse Van Vuuren