The Bank of Ghana (BoG) will significantly hike its interest rate should the upside risks to the economy intensify, Fitch Solutions has said in its February 2022 West Africa Monitor Report.

It pointed out that risks to the outlook are tilted towards a larger interest rate hike by the Central Bank than its current forecast indicates.

Again, the Central Bank will remain concerned about upside inflationary pressures, stemming from rising government spending, and continuing global supply challenges.

Additionally, the expected hike in the US Federal Reserve will influence the monetary policy in 2022.

“A further factor influencing Ghanaian monetary policy in 2022 will be the US Federal Reserve (Fed). We expect the Fed to hike its funds rate target range by 25 basis points (0.25%) in response to rising inflation, which our global team expects to remain higher and stickier than previously expected.”

“This will put pressure on the BoG to maintain Ghana's interest rate differential with the US, with the view to stemming capital outflows and supporting the currency”, it added.

Should oil prices trend higher, Fitch Solutions, believes the Bank of Ghana will implement a larger policy rate increase to its benchmark policy rate.

“Risks to the outlook are tilted towards a larger interest rate hike by the BoG than our current forecasts indicate. Should oil prices trend higher than our Oil & Gas team's forecasts currently indicate, transport inflation would accelerate further, pushing up headline price growth and prompting the Central Bank to implement a larger increase to its benchmark policy rate.”

The Bank of Ghana kept the policy rate unchanged at 14.5% during its last meeting in January 2022.