Ghana’s central bank is poised to look past a recent quickening in inflation and keep interest rates on hold on expectations that it’s likely to be short-lived, a pause that would give policymakers time to evaluate the impact of Finance Minister Ken Ofori-Atta’s mid-tern budget review.
Most economists polled by Bloomberg predict the monetary policy committee will maintain the benchmark rate at 29.5% for a second straight meeting. The rest forecast a hike of between 50 basis points to 250 basis points.
“I expect the central bank to hold the policy rate because of the uncertainty of what the mid-year budget comes up with,” said Courage Boti, an economist at Accra-based GCB Capital Ltd.
The budget review — which has been brought forward by the Finance Ministry to Tuesday from Thursday —will be the West African nation’s first since it embarked on debt restructuring in December and sealed a $3 billion lifeboat from the International Monetary Fund in mid-May to support its recovery.
The IMF program was conditional on the government committing to fiscal consolidation and collecting more revenue, which will have implications for inflation. The world’s second-largest grower of cocoa beans seeks to bring debt down to 55% of gross domestic product by 2028 from 71.2% of GDP at the end of 2022.
Inflation, which unexpectedly accelerated in the past two months to 42.5%, is forecast to start easing again, adding to the case to leave rates unchanged, said Boti and Goldman Sachs Group Inc. economists including Bojosi Morule and Andrew Matheny in a research note.
“The risk of inflation in the second half of the year appears to be more balanced and tilted slightly to the downside, so I think inflation is currently not a concern,” Boti said. “Given that economic growth could be depressed in the second quarter, holding the rate will at least lend some minor support to the private sector to boost growth.”
Inflation, which has been above the central bank’s 6% to 10% target range since September 2021, has exacerbated poverty and food insecurity and led real incomes of minimum-wage workers to drop by nearly 44%, the World Bank’s local office said in a report last week.
The MPC has lifted the key rate by 16 percentage points since November 2021 to contain it.
(Updates with new date of budget review in second deck head and paragraph four)
