Fitch Solutions predicts stable exchange rate for Ghana

Ghanaian

Fitch Solutions, an international rating agency, predicts that a gradual improvement in investor sentiment along with a US$600 million International Monetary Fund (IMF) disbursement will contribute to keeping Ghana's exchange rate stable.

According to the agency's report on interest rates and inflation for 2024, it foresees the cedi maintaining a level of approximately GHS12.0/USD in the first quarter of 2024.

Read full articleThis projection is slightly weaker than the average of GHS11.8/USD recorded in the same period last year.

The report suggests that the disbursement and positive investor sentiments will limit price pressures from imported goods and services in the coming months, supporting the current disinflationary trend. Fitch Solutions expects inflation to remain above 20 percent leading up to the March Monetary Policy Committee (MPC) meeting, prompting a vigilant stance from central bank policymakers.

The agency notes that price pressures are anticipated to moderate at a slower pace compared to the final quarter of 2023. Factors contributing to this include an increase in global oil prices due to tensions between Israel and Hamas and a significant rise in global shipping costs caused by heightened tensions in the Red Sea. Consequently, inflation rates are expected to stay well above the levels preferred by the Bank of Ghana, presenting significant upside risks.

Given this scenario, Fitch Solutions suggests that the central bank is unlikely to opt for a larger rate cut at the March MPC meeting.