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Ghana Monetary Policy January 2022

Ghana: Central Bank stays put in January, following a hike in November

At its first scheduled meeting of this year on 25–28 January, the Monetary Policy Committee of the Bank of Ghana (BoG) decided to keep rate at 14.50%. This move, which followed the first hike in six years in November, was in line with market expectations. The decision came amid still-high inflation, which reached 13.9% in January, moving further above the Bank’s medium-term target of 6.0%–10.0%. The Bank expects inflation to run high in the near-term, but it noted that November’s policy hike has yet to take its full effect on the economy. In addition, the Bank expects the 20% cut in government expenditure to keep a lid on price pressures and support its current policy rate going forward.

In its communiqué, the Bank said that it would continue to monitor the impact of the monetary and fiscal policies on the inflation outlook and did not rule out a possible “extraordinary meeting to re-assess the inflation outlook”. The majority of our panelists sees a more hawkish policy ahead, with multiple hikes expected to take place until end-2022.

Andrew Matheny and Bojosi Morule, economists at Goldman Sachs, see considerable tightening ahead:

“From a monetary policy perspective, recent inflation developments are incrementally hawkish. On the basis of heightened underlying inflation dynamics, the Cedi’s recent depreciation to now trade at all-time lows and the rise in oil prices, we expect inflation dynamics to continue to be challenging. This is consistent with our policy rate expectations which include 200 basis points of hikes this year, bringing the rate to 16.5%. We continue to view risks to the policy rate as being skewed to the upside.”

The next meeting is scheduled for 23–25 March 2022, with the decision to be announced on 28 March.

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