Databank CEO bemoans appetite for high interest rates due to high inflation
CEO of the Databank Group, Kojo Addae-Mensah, has bemoaned the overreaction of Ghanaian investors on the bonds market to high levels of inflation.
The national inflation rate has risen to 23.6% as of April this year, from 8.5% in April of last year. The current rate is almost thrice the Central Bank’s 2022 target of 8%.
While the central bank has raised its policy rate to 19% to help check inflation, many investors are expected to demand higher rates to lend to the government going forward due to the high inflation rate.
Speaking to Citi Business News on the matter, Mr. Addae-Mensah urged investors to make decisions looking at the likely future trajectory of inflation, rather than making investment decisions looking at past inflationary figures.
“Unfortunately in Ghana, we make decisions on the history of inflation, not in the future of inflation. So with inflation currently at 23.6 %, some people will then decide that if government doesn’t give them an interest rate of 24 % then they won’t buy government bonds. But if we think about the future of inflation and believe that it will trend downwards in the future, you will be happy if government gives you a bond with an interest rate of 22%, knowing that inflation will trend downwards in the near future.”
“We need to move away from that mindset where we look at inflation historically and look at inflation futuristically,” he added.
Source: Ghana Business
