Currency concerns force Bank of Ghana to act

The decision by the Bank of Ghana to aggressively hike rates today, combined with the FX restrictions announced yesterday, should bring some temporary relief to the cedi. However, a lack of progress in tackling the country’s enormous twin budget and current account deficits means the currency is likely to come under renewed pressure over the course of 2014. As such, we think rates will be raised further, perhaps to 20.00% by the end of this year.