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Business News of Monday, 11 May 2015


Ghana to leave interest rates on hold on Wednesday

The Bank of Ghana will wait until economic reforms kick in towards the end of the year before cutting interest rates to resuscitate growth in the West African nation, a Reuters poll found on Monday.

That will still make Ghana one of the few countries forecast to ease policy this year. Other emerging markets are expected to raise rates in preparation for contagion effects if the United States hikes interest rates in September as predicted.

Economists and analysts surveyed in the past week expect the Bank of Ghana to hold interest rates at 21 percent on Wednesday.

The poll forecasts the benchmark rate, which has risen 850 basis points in the past two years to try and stem a currency in freefall, will drop to 20 percent in the last monetary policy meeting of the year in November.

The cedi has lost around three-fifths of its value since the start of last year as public debt ballooned to unsustainable levels, sending investors scurrying.

Razia Khan of Standard Chartered said Ghana would rather hold off and focus on domestic economic reforms before taking advantage of an expected deceleration in inflation towards the end of the year.

Inflation in Ghana averaged about 15 percent last year and analysts say it might have peaked at 16.6 percent in March, but the bank is unlikely to give consumers a reprieve on interest rates just yet.

"A combination of caution about the exchange outlook and a 'wait-and-see' approach to inflation's near-term path may deter an easing in the current tight stance," Barclays said in a client note.

"Instead, we expect policy easing in the second half of the year when the decline in headline inflation becomes more pronounced."