Hike rates

POLL-Ghana’s central bank to hike rates to 18.75% to halt inflation

Band Vuyani Ndaba

JOHANNESBURG, May 23 (Reuters)The Bank of Ghana (BOG) will raise its benchmark rate again later on Monday, likely raising it by 175 basis points to 18.75%, as authorities scramble to rein in runaway inflation, according to a Reuters poll.

African central banks are feeling liquidity pressures and dollar shortages as the US Federal Reserve has hiked its own rates, hitting countries with serious public debt problems while undermining local currencies and fueling runaway inflation.

In a May 17-20 poll, there was no clear majority among the 10 analysts polled, with the median suggesting the BOG rose to 18.75%. Two respondents predicted an increase to 18.50%, two to 19.00%, two to 20.00%, one to 19.50% while three said there would be no change from 17.00%.

Barclays economists wrote that they saw the risk of another decisive hike at Ghana’s next MPC meeting, as monetary authorities admitted they were surprised by the sharp rise in the CPI from 19.4% in March to 23.6% in April.

This April reading was the highest in nearly two decades, making living standards even more difficult in the West African country. Central bank authorities were the most active on the continent and announced their largest ever interest rate hike in March of 250 basis points to 17.00%.

“Furthermore, it is unlikely, in our view, that the MPC will continue to realistically expect inflation to return to target within a year,” Barclays added in its note.

Prices for goods ranging from flour to sugar to fuel in Ghana have been problematic while the cedi GHS= the currency remains weak. The cedi has lost more than a quarter of its value since the start of the year, now trading at 7/$ against a very strong dollar.

Other monetary policy meetings are also due to take place on the continent in the coming days, with Governor Godwin Emefiele due to announce Nigeria’s monetary policy rate on Tuesday.

Ten of the 12 analysts expected Nigeria to hold rates at 11.5%, while two expected a 50 basis point hike to 12.0%.

Despite faster inflation at 16.82% in April for Nigeria, up for a third consecutive month in Africa’s largest economy, analysts do not expect the central bank to raise rates this year because of the general elections scheduled for early next year.

Nigeria’s National Bureau of Statistics is due to announce GDP data this week and the poll predicts Nigeria’s growth rate will have slowed to 2.93% in the last quarter from 3.98% in the previous three months.

The poll also suggested that Kenya’s central bank, which is due to announce its benchmark rates at the end of the month, will keep rates stable.

Yet Virag Forizs of Capital Economics wrote that African central banks are also clearly not turning a blind eye to tighter global financial conditions.

For example, South Africa’s central bank last week raised its main policy rate by the biggest margin in more than six years as it stepped up its efforts to fight inflation, pushing the rand higher.

(Reporting by Vuyani Ndaba; Editing by Hugh Lawson)

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