This will push the cost of borrowing further up.
In its latest report on Ghana dubbed ‘Africa Market Revealed’, it said the policy action by the Bank of Ghana is vital to help tame the falling value of the cedi, as well as slow down inflation.
“We expect the MPC [Monetary Policy Committee] to hike its key policy rate by a further 100-150 bps [basis points] in 2022.
Inflationary pressures are accelerating; the MPC clearly stated its intention to tame that by its aggressive 450 bps hike of the policy rate, to 19.0%, between March and May ”.
The cedi has come under severe pressure lately, with investors losing some value of their cedi-denominated assets. This has also escalated inflationary pressures.
However, the challenge still persists, a reason many had questioned the decision by the MPC to keep the policy rate at 19% in July 2022.
Standard Bank said the lack of external funding may deplete the country’s foreign exchange reserves as well as the MPC’s ability to mitigate dollar/cedi volatility.
It added that “inflationary pressures may become more entrenched, should the government fail to secure IMF funding, international oil prices remain elevated, and global risk appetite worsens further”.