Bank of Ghana Holds Key Interest Rate as Inflation Persists

Updated on
  • Central bank targets inflation band of 6 to 10 percent
  • Economy rebounding from the slowest growth in two decades

Ghana’s central bank maintained its benchmark interest rate at a 3 1/2-year low as consumer inflation persists.

The Bank of Ghana kept the rate at 20 percent, Governor Ernest Addison told reporters Monday in the capital, Accra. The median of 10 economists’ estimates was for 19.75 percent, with four forecasting the pause.

West Africa’s second-largest economy expanded 3.7 percent in 2016, the lowest annual rate in more than a quarter of a century, but grew at the fastest pace in three years in the third quarter as the oil industry surged.

What Our Economists Say

The decision appears to be based on evidence of some stickiness in inflation in the fourth quarter of 2017. Fuel-price increases in January are likely to add to expectations that it will be challenging for the central bank to keep inflation within target in the second half. I still expect another cut of 50 or 100 basis points when the MPC meets in March, but we are likely approaching the end of the current monetary-easing cycle.

-Mark Bohlund, Bloomberg Economics

Price growth quickened 11.8 percent from a year earlier in December and compares with 11.7 percent in November. However, it’s slowed from a record 19.2 percent in March 2016.

The increase in consumer prices was “not as favorable as we originally anticipated,” Addison said. The bank sees inflation slowing to the target range of 6 percent to 10 percent “sometime this year, hopefully in the second quarter.”

The country probably met its target to expand gross domestic product by 7.9 percent last year as economic activity “has picked up significantly,” he said. It likely met the budget-deficit target of 6.3 percent too, he said.

The cedi weakened 1.3 percent to 4.5425 per dollar at 12:19 p.m.

— With assistance by Simbarashe Gumbo

(Updates with governor’s comment in fifth paragraph.)
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