In brief
- Navigating inflation crosswinds. The Bank of Ghana’s monetary policy committee voted by a majority decision to retain the policy rate at 14.0%, in line with our expectation. This decision was due to emerging inflation risk from the Middle East conflict, potential utility tariff hikes, and unfavourable base effects which balanced-out the downside growth concerns. Although the authorities’ latest forecast and our outlook projects inflation to rise above 6.0%, the firmly anchored core inflation, continued fiscal discipline, relative exchange rate stability, and lower VAT rate should keep the end-2026 inflation below 10.0%.
- The new CRR regime: A liquidity minefield for banks and markets. The Bank of Ghana unexpectedly replaced the dynamic cash reserve ratio (CRR) regime with a uniform 20.0% CRR to be maintained in Cedis with effect from 04 June 2026, signalling a fresh liquidity tightening pivot. We estimate the move could sterilise over GHS 16.0bn while releasing USD 1.4bn, partly easing the recent FX pressure. However, we expect the new CRR regime to penalise FX deposits as banks will incur higher cost to keep reserve in local currency for every unit of Cedi depreciation. Also, banks (such as Societe Generale Ghana) which previously faced 15.0% CRR will now face a higher CRR burden of 20.0%, reducing deployable earning assets and straining profitability.
- CRR-induced tightening of Cedi liquidity creates opportunity for increased REPO activity. We foresee an increase in REPO transactions as banks with large FX deposits and sizeable investment securities will seek to collateralise part of the securities to unlock short-term Cedi funding for CRR compliance. However, an increase in demand for local currency liquidity ahead of the CRR monitoring dates will exert upward pressure on REPO rates.
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