Ghana Cedi Appreciation: Bank of Ghana Governor Clarifies No Target Rate Exists

The Bank of Ghana Governor, Dr. Johnson Asiama, has made it clear that the Bank of Ghana (BoG) does not have a specific target rate for the appreciation of the cedi. Speaking at a press conference after the Monetary Policy Committee (MPC) meeting, Dr. Asiama explained that the bank’s focus is on ensuring that exchange rate volatilities do not become excessive.

Factors Driving Cedi Appreciation

According to Dr. Asiama, the cedi’s recent appreciation is driven by strong reserves, robust monetary policy measures, and favorable market sentiments. He noted that market perception is playing a significant role in the cedi’s sustained appreciation, with the currency appreciating by 24.1% against the US dollar. Ghana’s international reserves currently stand at $10.6 billion, covering approximately 4.7 months of imports.

No Depletion of Reserves

The Governor dismissed suggestions that the cedi’s appreciation is being propped up by the depletion of reserves, emphasizing that the bank’s reserve position is adequate and ensures external resilience. He added that the bank has a lower limit of three months of import cover, but no upper limit target.

Inflation Outlook

The Bank of Ghana has set an end-of-year inflation target of 12% for 2025, which Dr. Asiama believes is achievable despite ongoing external threats. He expressed optimism that Ghana could return to single-digit inflation by the first quarter of 2026, citing the bank’s policy measures and current developments.

Revision to Cash Reserve Ratio

The Bank of Ghana has announced a revision to the Cash Reserve Ratio, requiring banks to maintain their reserves in their respective currencies. This move is expected to free up more lending for the private sector in the coming months, with some industry analysts anticipating a positive impact on the economy.

Private Sector Credit Recovery

The bank has also noted signs of recovery in private sector credit, with the Ghana Reference Rate dropping. Dr. Asiama assured that the bank will continue with current measures to sustain this decline.

Price Reductions on the Horizon

Responding to concerns that the currency’s strength has not translated into lower market prices, the Governor urged patience, stating that competition may play a significant role in the coming weeks, forcing traders to respond to current market developments. He assured that prices will soon reduce to reflect the cedi’s gains.

Market Sentiments and Future Outlook

The Bank of Ghana is monitoring broader exchange rate dynamics, especially the real effective exchange rate, to ensure that volatilities do not become excessive. Dr. Asiama emphasized that the bank’s focus is on maintaining exchange rate stability, while also ensuring that the economy remains resilient.

Source: Africa Publicity

Cedi  Appreciation Bank of Ghana  Governor No Target  Rate Dr. Johnson Asiama Central Bank Press Conference  Monetary Policy Committee  MPC