Bloomberg News

Ghana May Keep Lending Rate on Hold, Warn of Price Threats

February 14, 2012

(Updates with cedi in ninth paragraph.)

Feb. 14 (Bloomberg) -- Ghana’s central bank will probably leave its benchmark interest rate unchanged for a fourth meeting tomorrow as it signals a weaker currency may drive up prices in West Africa’s second-biggest economy.

The Bank of Ghana will keep the policy rate at 12.5 percent, after lowering it twice last year, according to 10 of 11 economists surveyed by Bloomberg. Bank of Ghana Governor Kwesi Amissah-Arthur is scheduled to announce the decision at 11 a.m. in the capital, Accra.

“The bias in the comment will continue to be towards the hawkish side with growing concerns around currency weakness feeding into higher inflation,” Stephen Bailey-Smith, sub- Saharan Africa strategist at Standard Bank Plc in London, said in an e-mailed response to questions.

Inflation, which was unchanged at 8.6 percent in December, may accelerate after fuel prices increased and the cedi fell 4.4 percent against the dollar this year, the most of 22 African currencies tracked by Bloomberg. The central bank cut its key rate by 6 percentage points since 2010, with the last adjustment in July.

The bank will probably start raising rates in the fourth quarter as inflation accelerates to above 10 percent in the second quarter, Michael Kafe, an economist at Morgan Stanley in Johannesburg, said in an e-mailed report to clients yesterday.

CPI Heading Higher

“Although inflation remains within single digits, upcoming data this week is likely to support our view that CPI has already bottomed and is now headed higher,” Kafe said. “This is thanks in large measure to the short-term impact of the country’s fuel-industry deregulation, a weaker currency, and technical base effects.”

Ghana became one of Africa’s newest oil exporters in December 2010, when production started at the offshore Jubilee oil field, operated by U.K.-based Tullow Oil Plc. The country is the world’s second-largest cocoa producer after Ivory Coast and the continent’s second-biggest gold miner after South Africa.

The economy, which expanded 12 percent in the third quarter from a year ago, grew an estimated 13.6 percent in 2011, Amissah-Arthur said Feb. 7.

The cedi dropped for a fourth day, losing 0.2 percent to 1.7175 against the dollar as of 12:30 p.m. in Accra.

“The monetary policy committee will not feel inclined to hike this early in the year,” Yvonne Mhango, a Johannesburg- based Africa economist at Renaissance Capital, said in an e- mailed note Feb. 10.

--Editors: Gordon Bell, Nasreen Seria

To contact the reporter on this story: Moses Mozart Dzawu in Accra at

To contact the editor responsible for this story: Andrew J. Barden at

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