Tuesday, October 18, 2011

Ghana May Keep Benchmark Interest Rate at 12.5% After Cedi Drops


(Bloomberg) -- Ghana’s central bank will probably leave its benchmark interest rate unchanged tomorrow, after lowering it twice this year, as a weaker currency threatens to reignite price pressures in Africa’s newest oil producer.

The Bank of Ghana will keep the policy rate at 12.5 percent, according to nine economists surveyed by Bloomberg. The decision will be announced at 11 a.m. local time in the capital, Accra.

Inflation, which was unchanged at 8.4 percent for a third consecutive month in September, may accelerate after the cedi slumped 7.2 percent against the dollar since Aug. 1, boosting import costs. The central bank kept its key rate unchanged at its last Monetary Policy Committee meeting on Sept. 1.

“Risks have skewed to the upside from the recent weakness in the cedi,” Stephen Bailey-Smith, sub-Saharan Africa strategist at Standard Bank Group Ltd. in London, said in an e- mailed response to questions. “However, headline inflation remains muted at 8.4 percent in September, providing adequate comfort for the Bank of Ghana to remain on hold for the time being.”

Price pressures are also rising after the government raised water and electricity prices and boosted civil servants’ wages by 20 percent in August. The economy, which earns most of its foreign exchange from gold and cocoa exports, expanded a revised 16.4 percent in the second quarter from a year ago, the statistics office said today.

“Future inflation risks are likely to make the Bank of Ghana more wary of further easing,” Razia Khan, head of Africa research at Standard Chartered Plc in London, said in an e-mail.

Ghana became Africa’s newest oil exporter in December, when production started at the offshore Jubilee oil field, which is operated by U.K.-based Tullow Oil Plc. Ghana is the world’s second-largest cocoa producer after Ivory Coast and the continent’s No. 2 gold producer after South Africa.

--With assistance from Simbarashe Gumbo in Johannesburg. Editors: Nasreen Seria, Gordon Bell

To contact the reporters on this story: Moses Mozart Dzawu in Accra at mdzawu@bloomberg.net; Pauline Bax in Abidjan at pbax@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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