<\/p>\n
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US investment banking giant, Goldman Sachs is projecting at least a 200 basis points hike in the policy rate to 21%, from the current rate of 19%. <\/p>\n
The forecast is coming ahead of the Bank of Ghana\u2019s Emergency Monetary Policy Committee (MPC) meeting on Wednesday, August 17th, 2022. <\/p>\n
Goldman Sachs in its advice to investors said the move by the Bank of Ghana will be influenced by extra measures to be taken by the Central Bank to deal with the current pressures on the Ghana cedi as well as the rising inflation. <\/p>\n
\u201cWe expect the MPC to announce a 200 basis points hike in policy rate to 21%; and see a meaningful upside risk to this forecast, given the extent of FX [foreign exchange] and domestic financing pressures\u201d.<\/p>\n
Emergency MPC meeting<\/strong><\/p>\n The Bank of Ghana on Monday, August 15th, 2022, announced that it will hold an Emergency MPC meeting on Wednesday August 17th, 2022 to review developments in the economy. <\/p>\n It is however still not clear what might be the main reason for this meeting. <\/p>\n According to the Central Bank\u2019s own calendar, the MPC was initially expected to meet next month \u2013 September 20th to 23rd, 2022.<\/p>\n However, the possibility of the BoG taking some extra measures on the monetary side to check the rising inflation rate, could be the reason. Others are also looking forward to some foreign currency measures to check the cedi\u2019s sharp depreciation.<\/p>\n But a source close to the Central Bank maintained that previous examples have shown it\u2019s never prudent to take emergency foreign exchange measures when the cedi is depreciating, adding, that \u201ca similar measure taken in 2014 did not work.\u201d This, the source added, could send negative signals to the market.<\/p>\n Current challenges<\/strong><\/p>\n The emergency meeting is coming after an acceleration in the pace of depreciation of the cedi in the past two weeks (almost 10% vs. the US dollar), amounting to a cumulative 50% currency depreciation year-to-date.<\/p>\n Goldman Sachs was of the view that inflation and financial stability risks, stemming from foreign exchange weakness combined with the challenging domestic financing environment for the government \u2014 which has led the BoG to begin monetising the deficit \u2014 have prompted the call for this meeting.<\/p>\n Ghana and the IMF programme<\/strong><\/p>\n Goldman Sachs was however worried about the commitment of the Ghanaian authorities to an IMF programme, based on its observation after their recent visit to Ghana.<\/p>\n \u201cIn our recent trip to Accra, one notable observation was the authorities perceived lack of urgency in concluding programme talks with the IMF (with locals expecting a 6-9 month timeframe), despite intensifying BoP [balance of payment], FX [foreign exchange] and fiscal financing pressures\u201d, it added in its advice to investors.<\/p>\n IMF programme negotiations and the economy<\/strong><\/p>\n The investment banking giant was worried about the delay in reaching a deal with the IMF, saying, it might not be good for the economy. <\/p>\n \u201cWe have argued that a delayed conclusion creates the risk of further deficit monetization by the BoG,\u201d it added.<\/p>\n It also raised concerns about how \u201ccedi depreciation and a decline in FX [foreign exchange] reserves, implying that the macroeconomic outlook may deteriorate further in the near term.\u201d<\/p>\n Monetary Policy Rate decision in July 2022<\/strong><\/p>\n The Bank of Ghana at its last meeting in July 2022 left the rate unchanged at 19%, citing \u201cdeceleration\u201d of the rate of inflation and concerns over economic growth.<\/p>\n The Central Bank, has since the end of 2021 increased the policy rate by some 550 basis points to contain the rising inflation.<\/p>\n The Governor, Dr. Ernest Addison, during the MPC press conference indicated that the Central Bank was pausing to observe the impact of inflationary pressures on recent rate hikes and other policies, \u201cnoting that the bank had observed that inflation had persisted and broadened to almost all items in the consumer basket\u201d.<\/p>\n The government at the last meeting also maintained that \u201cthe committee was of the view that it was appropriate to pause and observe the impact of the recent monetary measures already taken.\u201d<\/p>\n <\/p><\/div>\n","protected":false},"excerpt":{"rendered":" US investment banking giant, Goldman Sachs is projecting at least a 200 basis points hike in the policy rate to 21%, from the current rate of 19%. The forecast is coming ahead of the Bank of Ghana\u2019s Emergency Monetary Policy Committee (MPC) meeting on Wednesday, August 17th, 2022. Goldman Sachs in its advice to investors […]<\/p>\n","protected":false},"author":1,"featured_media":1180573,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[187],"tags":[6960,23621,1990,1360,458,9320,587,3747,179,23622],"class_list":["post-1180910","post","type-post","status-publish","format-standard","has-post-thumbnail","category-politics","tag-emergency","tag-goldman","tag-hike","tag-holds","tag-meeting","tag-mpc","tag-policy","tag-projects","tag-rate","tag-sachs"],"_links":{"self":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts\/1180910","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/comments?post=1180910"}],"version-history":[{"count":0,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts\/1180910\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/media?parent=1180910"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/categories?post=1180910"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/tags?post=1180910"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}