The Bank of Ghana’s (BoG’s) Monetary Policy Committee will announce its monetary decision next Monday (31 May), but analysts at Chapel Hill Denham say, the BoG has justification to cut the Monetary Policy Rate from 14.5% based on the positive inflation reading in April,
However, they do not expect the committee to ease the monetary rate yet, given the elevated fiscal pressures.
Speaking on CNBC Africa, Omotola Abimbola, macro and fixed income analyst, Chapel Hill Denham said, “The Bank of Ghana will actually retain its monetary policy rate at 14.5% and our expectation is mainly despite the fact that the economy although is experiencing much slower or lower inflation pressure, what we believe is that the BoG will remain very cautious…”
In March 2020, the BoG lowered the policy rate by 150 basis points, from 16% to 14.5%. It was the first time since 2019 that the central bank had lowered the policy rate.
The Bank of Ghana has since then maintained the policy rate at 14.5% six consecutive times.
Business confidence
Meanwhile, the central bank’s latest confidence surveys conducted in February 2021 showed some softening of both consumer and business sentiments.
“The softening of consumer confidence reflected heightened concerns about the potential re-imposition of restrictions following the upsurge in COVID-19 cases in the first two months of the year.”
According to him, the country’s gross international reserves at the end of February 2021 was US$8,719.7 million, providing cover for 4.2 months of imports of goods.
The reserve level compares with the end-December 2020 position of US$8,624.4 million, which is equivalent to 4.1 months of import cover, according to the central bank.
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