Global pressures weigh on cedi as US dollar strengthens – BoG

The Bank of Ghana (BoG) has warned that global financial conditions and a strengthening US dollar are putting pressure on emerging market currencies, including the Ghanaian cedi. Governor Dr Johnson Asiama explained that these pressures are primarily driven by heightened global uncertainty and the ongoing conflict in the Middle East. He spoke at the opening of the Monetary Policy Committee meeting.

The Middle East conflict has not only disrupted trade flows but also caused energy prices to soar, introducing additional risks to global growth and inflation. Dr Asiama reported that Brent crude oil, which had been trading above $85 per barrel in July, had increased to approximately $107 per barrel by the time of the meeting.

The rise in oil prices is concerning as it is taking place amid depleted global inventories, reducing markets' ability to absorb additional supply shocks. Recently, several central banks that had begun easing their monetary policies have either paused or reversed their decisions, while financial markets are betting on higher US interest rates. This scenario is further weighing on the Ghanaian cedi, along with the stronger US dollar.

According to Dr Asiama, these global developments present risks for Ghana's inflation outlook. Rising energy and agricultural input prices are contributing to global headline inflation. Additionally, global growth forecasts have been revised downward, with the World Bank and United Nations now projecting global growth at 2.5%, which is lower than the IMF's April estimate of 3.1%.

As the BoG assesses the impact of these external pressures on Ghana's economy, it is considering the appropriate monetary policy response during its 132nd MPC meeting.