By the end of this year's December, it's expected that the Bank of Ghana will announce an increase in the Monetary Policy Rate.

Prior to the scheduled and annual meeting of the central bank in November, Standard Bank, a South African institution, made this forecast.

Standard Bank thinks that a rate increase will assist reduce the negative real return between inflation and interest rates, even though it will have an impact on the cost of borrowing.

Inflation in the country was estimated by the Ghana Statistical Service to be 37.2% in October of this year, while interest rates were estimated to be around 33%.

In addition, the Bank of Ghana in October this year hiked the Monetary Policy Rate by 250 basis points from 22 percent to 24.5 percent to contain soaring inflationary pressures.

But Standard Bank in its September 2022 African Markets Revealed report said the BoG MPC will have to factor in elevated underlying inflationary pressures at its November meeting as well as second-round impacts of weaker cedi which has been experiencing persistent depreciation.

“Still, the MPC sees a potential International Monetary Fund deal as beginning to address fiscal challenges, thereby helping to anchor inflation expectations. Furthermore, the MPC is still working with mining firms to find a structure to enable them to boost the FX (foreign exchange) reserves via direct FX sales from this large export-earning sector,” the report said.

Touching on Ghana’s inflation outlook, the report outlined figures could ease from October to November this year but pointed out it could remain in double digits until at least August 2023.

“However, should negotiations with the IMF prove protracted, foreign portfolio outflows may burgeon amidst a still volatile global risk environment, placing further upward pressure on US dollar/Ghana cedi, as well as keep inflation stickier than we currently anticipate,” the report added.

Focusing on Ghana’s treasury yields, the report noted, “Nothing much implies that yields at the shorter end of the curve will ease over the next 4 months or so. Indeed, with headline inflation likely elevated for most of half year 2023, Treasury bill yields may prove sticky.”