Ms. Gifty Annor-Sika, a financial analyst, has called on the Bank of Ghana to tighten the monetary policy as they make arrangement for the 113th Regular Meetings, in a bid to drive investment on the Ghana stock market in this quarter three (3).
The analyst, speaking in an interview, explained that tightening monetary policies from the central bankers will most likely play a major role in determining the risks to expect in the second half of 2023 and that of 3rd quarter, as it relates to volatility in the fixed income market.
“I implore the Bank of Ghana to tighten the policy rate at the end of this MPC meeting to drive investment in the remainder of the second half of the year and more importantly in the 3rd quarter. Basically, a high MPC rate attracts investors into the fixed market, leaving the equities market to go bearish.
“Even though I expect fixed income yields to be slightly lower relative to the average levels seen in 2022, driven by stability in central banks’ policy rates and a decline in some cases, the possibility of higher volatility in yields still remains” she said.
While addressing the possibility of rate hike to fight inflation because of the fact that inflation has started climbing higher again, the analyst said, “We need to think more about dealing with inflation for the longer term. In my mind, the inflation problem is a multi-cycle problem, and this is not going to just go away with hawkish policy rate approach”.
The Biggest Issues Right Now
Ms Annor-Sika noted that one of the biggest issues right now is market volatility – the lack of liquidity in markets. She stated that the only thing that’s going to take that down a notch is if the Central Bank cuts down the policy rate.
“As a net, high yield creates income that needs to get reinvested. And if you’re not even bringing enough to be reinvested, the market declines, leading to low confident in the market. And this is not good for investors.
“In the equities space, general expectation is in favour of a negative performance by most equity markets as interest rates remain high and the possibility of economic recessions increases.”
Ms Annor-Sika further advised investors to properly time their entry and exit from financial markets in the second half of the year 2023 in order to assess investment opportunities and navigate risks during the rest of the year.
The financial analyst who doubles as the President of Women In Forex Ghana noted that there is a variety of offerings designed to help investors take advantage of its expertise in the various financial markets. She thus called on investors to take advantage of such expertise to help them make meaningful returns in the stock market.
Annor-Sika added that the cedi and dollar offerings are products investors can take advantage of to exploit the opportunities in the local and international markets.
As the country’s economy suffers from deep macroeconomic issues, the central bank announced its 113th Regular Meetings from Wednesday, July 19, 2023, to Friday, July 21, 2023.
During the meeting, the Bank of Ghana will thoroughly assess the current economic situation and review developments in the economy. The MPC will analyze various economic indicators, including inflation rates, GDP growth, exchange rates, and other relevant factors that influence monetary policy decisions.
The decisions made by the MPC can have significant implications for the economy, including the Ghana Stock Exchange as they can influence interest rates, lending practices, and overall monetary conditions. The committee’s decisions aim to achieve the Bank of Ghana’s objectives of maintaining price stability, supporting economic growth, and ensuring financial stability within the country.