Currency outside banks grow consecutively in first 4 months of 2022 despite rising inflation

Currency outside banks grew consecutively in the first four months of this year, despite the policy rate increment in March 2022 to control inflation.
According to data from the Bank of Ghana, money in circulation grew by 16.3% in April 2022, from 14.3% in March 2022, a period where money supply should have reduced to positively influence the Central Bank’s monetary Policy.
The figures from the Bank of Ghana indicate that money supply shot up from January 2022, despite the rising inflation.
Even in the month of March 2022, whereby the Central Bank increase the policy rate by 2.5 percentage points to help reduce inflation and subsequently bring down interest rates, money in circulation went up.
Currency outside banks also grew by 9.8% and further to 11.4% in February 2022 and then to 14.3% in March 2022.
This appears to be interesting because it came during the period in which prices of goods and services were surging, and the Central Bank had tighten its monetary policy to help tame inflation.
Meanwhile, growth of demand deposits, usually current and call accounts witnessed a significant decline from February 2022 to April 2022 to 17.6%.
It grew by 27.6% in January 2022 and 27.9% in February 2022, but declined to 17.6% in March 2022 and April 2022 respectively.
This is compared with 16.5%, 19.4%, 19.6% and 19.4% in September 2021, October 2021, November 2021 and December 2021 respectively.
Importantly, banks prioritized demand deposits because it comes with virtually no cost. It rather support profitability of the financial institutions.
On the other hand, growth of Savings and Time Deposits grew marginally. It grew by 8.3% in January 2022, but declined to 6.6% and later rose to 9% and 9.99% in March 2022 and April 2022 respectively.
It’s expected to grow strongly going forward due to the rising interest rates to stimulate savings and investments.