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Ghana Central Bank sees scope for further interest-rate cuts

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Last month’s 100 basis-point cut took the benchmark rate to an almost six-year low of 16 per cent and bucked a worldwide trend toward tightening.

Tuesday 12, February 2019

(Bloomberg) --Ghana’s central bank has room for another interest-rate cut as early as next month, according to a member of the Monetary Policy Committee.

Following an unexpected reduction in the key rate in January, further loosening in March “could be a possibility” if inflation trends downward, said Philip Abradu-Otoo, who is also the head of research at the Bank of Ghana.

The central bank is “fairly confident that inflation will behave,” Abradu-Otoo said Friday in an interview in the capital, Accra. “Our forecast did not show any shift and the shocks that are coming are not materially shifting” the inflation outlook, he said.

While inflation has been inside the central bank’s target band for nine months, it still hovers close to the 10 per cent upper end of the range.

Ghana had scope for a rate cut in the November, but the MPC was concerned about trade tensions, global inflation pressures and financial-market volatility, Abradu-Otoo said. These risks, and concerns about the US Federal Reserve’s rate increases, had subsided by January, he said.

Ghana is nearing the end of an almost $1-billion programme with the International Monetary Fund. The zero-financing agreement with the lender, under which the central bank stopped funding the budget deficit, helped to bring inflation down to 9.4 per cent in December from a record 19.2 per cent in 2016, Abradu-Otoo said. The accord has been extended until 2020, he

West Africa’s second-largest economy faces a test to maintain economic gains and fiscal discipline after the bailout programme ends in April. The Financial Stability Advisory Council that the government has established will improve policy coordination, according to Stephen Opata, an MPC member and the central bank’s head of financial markets.

 

TAGS : Central Bank of Ghana, IMF

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