Ghana’s year-on-year inflation rate remains firmly on track to exceed the International Monetary Fund’s (IMF) inflation target for the end of 2023, IC Research said.
The report shows that headline inflation in November 2023 (26.4%) is symmetrical within the inner band of 27.4% and outer band of 25.4% of the lower bound under the Monetary Policy Consultation Clause of the IMF program. He pointed out that the rate has been raised.
“Against this background, we urge the authorities to [government] It will exceed the IMF’s core target of 29.4% by the end of 2023 and tilt firmly toward the outer band of the lower bound. ”
“Encouragingly, our latest 2023 year-end CPI forecast shows a projected December 2023 landing zone of 24.2%, potentially exceeding even the outer band of 25.4%.
During the MPC meeting in November 2023, the Bank of Ghana unified the cash reserve requirement for all bank deposits to be held in Cedi terms, effectively raising the cash reserve ratio to 15.0%.
IC Research added: “Our impact assessment shows that this financial decision effectively siphoned GH¢4.6 billion from the interbank market, as banks’ holdings of Ghanaian banknotes decreased to GH¢28.1 billion as of December 13, 2023. (As of December 13, 2023, the Bank of Ghana’s banknote holdings were 32.6 billion cents) (Monetary Policy Committee).
It added that the monetary tightening triggered a reversal in the rise in yields across Treasury bills, following three consecutive weeks of lower government bond yields prior to the MPC.
The report warned that the Treasury’s exclusive reliance on Treasury bills to finance its 2023 and 2024 budget deficits remained an upside risk to yields.
However, we expect sharp disinflation to ease pressure and potentially reinvigorate modest downside risks to yields.
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