GCB Capital sees August inflation at 34%

BY: GCB Capital

GCB Capital has projected a strong jump in inflation to 34 per cent for August.

The investment arm of the largely state-owned lender, GCB Bank, said it expected the increased cedi depreciation to combine with other inflationary pressures to spike the rate for August.

Inflation peaked at 31.7 per cent in July after resuming an upward trend in November last year.

With the next reading due for September 14, GCB Capital said nothing showed that the upward trajectory would reverse.

In its weekly market review, the firm said “given the elevated exchange rate pressures through August, and the simmering ex-pump petroleum and food prices, we expect headline inflation to climb higher,” it said.

The cedi lost 7.8 per cent of its value to the United States dollar in August

More ahead

Beyond the expected rise in August, GCB Capital said it did not expect a slowdown in the jump anytime soon.

“The pass-through effects of the currency pressures and their lagged impact, together with the utility tariff hike and the other lingering cost pressures could push inflation higher over the next two months,” it said.


Demand for treasury securities has picked up tremendously, with the last sale raking in GH¢2.23 billion.

The week’s sale was up by a quarter and also exceeded the government’s auction target by almost a third – 32 per cent.

It also exceeded the period’s refinancing obligation by 42 per cent.

The GCB Capital weekly market review indicated that T-bill yields also continued the upward surge.

The 91-day bill rose to 29.48 per cent, indicating a jump by 44 basis points (bps) over the previous week.

The 182-day bill also climbed to 31.05 per cent after rising by 83bps over the week before.

Auction performance

The government received strong demand for its offer of 91-day to 182-day bills at the week under review.

It took up GH¢2.23 billion, which exceeded the target for the week by 32 per cent and the refinancing obligation that was due on September 12 by 42 per cent.


GCB Capital said it had noted a slight tightening in cedi liquidity levels at the week's close as the interbank interest rate closed higher at 22 per cent, rising by two bps.

“We believe tightening liquidity conditions and the prevailing inflation risks underscore the continuous uptick in yields,” the investment arm of GCB Bank said.

This week’s auction

This week's T-bill offer will target a gross issuance of GH¢1.72 billion across the 91-day to 364-day bills to rollover upcoming T-bill maturities estimated at GH¢1.60 billion.

The target is about 2.38 per cent higher than the previous week’s auction.

The Ghana Cocoa Board (COCOBOD) will also return to market on September 13 to attempt rolling over the maturing 182-day bill of outstanding face value (FV) worth GH¢2.1 billion.

Given the sizeable money market refinancing obligation in the week ahead, the tightening liquidity conditions and the rising inflation expectations, T-bill yields could climb up significantly higher at the next auction.

Fixed income

Last week, investors traded GH¢2.47 billion on the secondary bonds market.

Investor appetite remained rooted in the short term as tenors of residual maturity of less than five years dominated activity on the market.

Bid yields were now firmly above the 30 per cent level and the back end of the yield curve closed the week around 40 per cent. — GCB Captial