Accra - Ghana’s central bank will probably increase its benchmark interest rate for a second time this year to tame inflation and arrest the slide in Africa’s worst performing currency.
The Bank of Ghana will raise the rate by 1 percentage point to 19 percent, according to four of seven economists surveyed by Bloomberg News.
The rest expect it to be left unchanged for a second consecutive meeting.
Governor Kofi Wampah will announce the committee’s decision today at about 11 am in Accra, the capital.
The currency of the world’s second-biggest cocoa producer has weakened 30 percent against the dollar this year, the worst among 24 African currencies tracked by Bloomberg.
Cedi depreciation drove inflation higher for a ninth consecutive month to 14.8 percent in May, a four-year high.
“In such an environment where the currency has depreciated unabatedly, the central bank will have to tighten interest rates,” Yvonne Mhango, a Johannesburg-based Sub-Saharan Africa economist at Renaissance Capital, said by phone July 7.
“There’s significant upside risk for inflation.”
Moody’s Investors Service cut Ghana’s credit rating on June 28 by one step to B2, five levels below investment grade, citing a budget gap it estimated will exceed 10 percent of gross domestic product for a third year.
Pressure to increase government wages, rising borrowing costs and arrears will limit government’s ability to narrow the budget gap to 8.5 percent of gross domestic product this year, Ridle Markus and Dumisani Ngwenya, Africa strategists at Absa Capital in Johannesburg, said in an e-mailed note to clients on July 7.
The cedi dropped 0.1 percent to 3.3951 per dollar at 1:57 pm in Accra yesterday. - Bloomberg News