Ghana: Central bank predicts high inflation outlook as interest rates raised
Ghana’s central bank has raised its interest rates to 29% as it declared that the inflation outlook had worsened slightly over the past two months and required close monitoring.
Inflation rose slightly in January before slowing again in February, and central bank governor Ernest Addison said in a press conference that the latest inflation forecasts indicated a higher profile than at the last policy meeting in January.
The West African cocoa, gold, and oil producer has been restructuring its debts, supported by a $3 billion International Monetary Fund (IMF) programme while hoping to exit its worst economic chaos in a generation.
The bank’s Monetary Policy Committee also decided to modify the Cash Reserve Ratio (CRR) to encourage banks to lend rather than put more money in Treasury bills.
According to Addison, the CRR will be 15% for banks with a loan-to-deposit ratio of 55% or more, 20% for banks with a loan-to-deposit ratio of 40% to 55%, and 25% for banks with a loan-to-deposit ratio of less than 40%.
He added that “the banks will now be forced to do more of what banks do, which is financial intermediation and not … holding government paper.”
