Despite the sharp decline in inflation so far, the real policy rate and real returns on fixed-income securities are still negative.

According to GCB Capital, the domestic investment climate in both the capital market and the real sector is highly unfavourable.

These unfavourable conditions, it said, underpin the rising Non-Performing Loans (NPLs) and the tight credit stance, fueling the strong appetite for high-yielding T-bills and Open Market Operations (OMO) bills and the high levels of interbank cedi liquidity.

“Thus, we are aligned with the decision to keep the policy rate appropriately tight for longer to anchor inflation firmly towards the medium-term target band despite the decline in both headline and core inflation”.

The Monetary Policy Committee held the monetary policy rate at 30% for the second consecutive time at its November 2023 policy meeting.

The MPC justified the steady policy rate, saying, though inflation is receding, it remains high relative to the target, necessitating a continuously tight policy stance until it is anchored downward.

It continued that while inflation expectations are improving, the outlook is still fragile and highly susceptible to domestic and global shocks amidst the lingering domestic and external risk factors.

“At 35.2%, inflation is still high and distant from the medium-term target band, requiring an appropriately tight monetary policy stance to complement the ongoing fiscal, debt, and structural reforms in firmly anchoring lower inflation expectations”, it added.