Cost of credit will not come down anytime soon, but rather go up slightly, from next year.

According to Fitch Solutions, research arm of ratings agency, Fitch, this is because the Bank of Ghana will hold its Monetary Policy Rate at 13.50% till the end of the year, and then hike it to 14.50% next year.

This Fitch Solutions said reflects continued balancing of risks to the growth and inflation outlooks.

“We expect the BoG to shift to moderate policy tightening in 2022, and hike the Monetary Policy Rate by 100 basis points to 14.50% by end-2022. A sufficient proportion of vulnerable groups in Ghana is likely to be vaccinated next year to prompt the government to relax most Covid-related restrictions, thus sustaining the economic recovery. We think that, with risks to growth reducing, the BoG will shift to a focus on targeting inflation and supporting the cedi.”

Furthermore, it pointed out that “risks to the outlook are tilted towards the BoG holding for longer for this year. If the inoculation programme fails to gain momentum in half-year 2021 and 2022, the government would retain social distancing rules well into 2022, posing significant headwinds to growth. Consequently, we think the central bank would seek to cushion the impact on households and business by refraining from hiking interest rates.”

Speaking to Joy Business, Senior Analyst at Fitch Solutions responsible for the Sub-Saharan Africa region, William Attwell said “inflation is relatively elevated at the upper end of the Central Bank’s target band. And thus we do expect that the Bank of Ghana at this point next year will take it [policy rate] to 14.5%.

BoG cut policy to 10-year low in May 2021

The Bank of Ghana last cut the Monetary Policy Rate in May this year by 1.0% to a 10-year low of 13.50% in May 2021, to support the country’s economic recovery, following the impact of Covid-19.

In its statement it said there was the need to support the economy amid a lack of certainty about further waves of the pandemic with new variants and vaccination challenges.

It emphasised that although risks to the inflation outlook remain muted in the near term', pressures from 'rents and transport fares would require some monitoring to anchor inflation expectations.