Experts predict 200bps increase in policy rate due to inflation, weak cedi
The policy rate of the Bank of Ghana is likely to increase for the seventh time since November 2021, according to Bloomberg.
The higher-than-expected jump in inflation in the last two months of 2022, along with renewed weakness in the cedi, is expected to push the policy rate up from 27.0%.
This increase in the policy rate will result in loans becoming more expensive.
Head of Research at Standard Chartered Bank in charge of Africa and the Middle East, Razia Khan, is also projecting a 200 basis point increase in the policy rate, reaching a peak of 31.0% by March 2023.
The continued increase in inflation is the main driver of this projection. Additionally, Khan warns that if the debt restructuring process takes longer to conclude, it could put further pressure on the cedi, forcing the Bank of Ghana to tighten the policy rate further.
The Monetary Policy Committee is set to begin its quarterly meeting from January 24th to January 27th, 2022, to review developments in the economy and potentially make a decision on the policy rate.
