Governor Addison forecasts reduction in T-Bill rates to circa 17% by end-2024

Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has projected interest rates on the Government’s short-term debt securities to reduce from the current 28.5% – 31.7% to 13% -17% by the end of 2024.

Interest rates on T-Bills, the Governor noted, are expected to mimic the decline in headline inflation which is also forecasted to end the year between 13% and 17% in line with projections by the IMF.

Interest rates on T-Bills for some weeks now have been on the decline.

Yields on T-Bills issued last Friday settled at averages of 28.59% for the 91-Day Bill and 31.09% for the 182-Day Bill with both declining by 60bps and 65bps respectively compared to the average rates for the previous auction.

The 364-Day bill also saw a yield decline of 55bps to settle at 31.79%.

“Rates on T-Bills are well aligned with the policy rate and we expect a decline in inflation to extend to the T-Bill market and interest rates to fall to inflation rate projected for end-2024,” he remarked.

Touching on whether the current high-interest rates are likely to lead to a restructuring of T-Bills, the Governor noted, ”We do not see any debt issue arising from the T-Bill market due to the current high interest rates.”

Meanwhile, the Bank of Ghana (BoG) has reduced its Monetary Policy Rate (base rate) to 29 percent.

The reduction indicates a 100 basis points decline in the apex bank’s prime rate from the previous policy rate of 30 percent.

The reduction in the policy rate was announced by the Governor of the Bank of Ghana, Dr Ernest Addison at the 116th Monetary Policy Committee (MPC) press briefing on Monday, January 29, 2024.

The new policy rate follows the review of macroeconomic developments in the country for the past two months by the MPC.

With a reduction in the policy rate, the lending rate by commercial banks to businesses is expected to fall in line with the new policy rate.

According to Dr Addison, the decision by the Committee to cut the policy rate comes on the back of the steady decline in headline inflation from the December 2022 year high of 54 percent to 23 percent in December 2023.

Asserting that inflation expectations are well anchored with the outlook for inflation being continued disinflation as previous policy tightening effects impact both headline and core inflation.

Source:norvanreports