Ghana's Central Bank has unexpectedly raised its benchmark interest rate by one percentage point to stabilise the weakening cedi as inflation reached a three-year high.
Bank of Ghana Governor Kofi Wampah told reporters in Accra last week that the policy rate had been lifted to 16%. Most economists had predicted that the rate would remain unchanged at 15%.
Risks to Ghana's inflation rate, which grew from 10.4% in March to 10.6% in April, include an increase in fuel costs, fiscal spending and exchange rate fluctuations, Wampah said. The trade deficit has increased as export revenue fell, due for the most part to declining commodity prices, he said.
“The combination of these factors has resulted in heightened exchange rate pressures,” Wampah said. “The inflation profile is therefore currently dislodged from trends over the recent past.”
The central bank increased its key rate by 2.5% in 2012 and boosted Treasury-bill sales to help stabilise the cedi, which fell 14% against the dollar last year.
The cedi has continued to perform badly in 2013, depreciating 4.7% against the dollar as companies increased their demand for foreign exchange to pay import bills and send profits home. The local currency came under even more pressure after the government announced a budget deficit of 12.1% of GDP last year, nearly twice the 6.7% target.
© 2013 Menas Associates
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