Ghana delivers biggest rate hike ever at emergency meeting



By Cooper Inveen and Christian Akorlie

ACCRA, Aug 17 (Reuters) - Ghana's central bank on Wednesday delivered its biggest rate hike ever, a 300 basis point increase to 22% GHCBIR=ECI , at an emergency meeting to address the economy's rapid deterioration amid crippling inflation.

The hike comes just three weeks after it kept its monetary policy rate unchanged at 19% and said it was pausing to observe the impact of a series of record-breaking hikes.

It had been due to meet again in late September, but on Monday it said an emergency meeting was needed.

Ghana's cedi currency GHS= has continued its steep decline since the July monetary policy meeting, losing more than 6% against the dollar on Wednesday alone, according to Refinitiv Eikon data. That brought total losses for 2022 to close to 39%.

Meanwhile, consumer inflation GHCPIY=ECI rose further to 31.7% annually in July, its highest since late 2003, and the government's top statistician warned it was not possible to say whether inflation had peaked.

The conditions have sparked street demonstrations against economic hardship. Last month, hundreds of demonstrators in Ghana's capital Accra protested against fuel price hikes, a tax on electronic payments and other levies.

"The Committee took note of the increase in inflation in the month of July and heightened pressures in (the) foreign exchange market," the Bank of Ghana's Monetary Policy Committee said in a statement.

"Considering the risks to the inflation outlook, the Committee decided on a 300 basis points increase," it said, adding that it would also raise the primary reserve requirement of banks from 12% to 15% in a phased manner.

The committee partially blamed Ghana's current economic woes on external factors including a strong dollar and tighter global financial conditions.

It said revenue generation had been a challenge this year for the government and that without access to international capital markets, a central bank overdraft had helped to fill the gap.

Ghana is in the early stages of negotiating a support deal with the International Monetary Fund after initially saying it would not turn to the fund for help.

Friday's hike could help show Ghana is committed to reaching a deal with the IMF, said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.

"While a higher policy rate alone may not be sufficient to stabilise the currency in the very near term, it will at least provide reassurance on the seriousness of Ghana's negotiations with the IMF," she said.


Reporting by Cooper Inveen and Christian Akorlie; Editing by Alexander Winning and Aurora Ellis

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.