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Current inflation of nearly 24% baffling, major decisions will be taken - Governor

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Wed, 18 May 2022 Source: www.ghanaweb.com

Inflation hits 23.6%

BoG increases policy rate to 17% at 105th MPC meeting

BoG MPC commences third scheduled meeting of 2022


Governor of the Bank of Ghana, Dr. Ernest Addison, has noted that the country’s current inflation comes as a surprise to his team as food, transport, and imports have pushed the country’s inflation to 23.6%.

The Governor noted that the monetary policy is in a huge fix even as it begins meeting today, May 18, 2022, to make decisions on the nearly 24% inflation rate as well as the monetary policy rate of 17%.

Speaking to Bloomberg, Dr. Addison noted that even though issues are complicated currently, a major decision will be taken.

“It’s an issue which in a sense is baffling to all of us. A year ago, inflation in Ghana was near single digit, particularly we were at 7.5% and then we find ourselves a year later in high double digits. It’s a very complicated environment, as you yourself are aware we have come out of COVID-19. But Ghana, fortunately, was able to weather the impact of COVD well without recording high-interest rates.”

“And it seems as if the economy has picked up significantly with a positive growth rate of 5.4%. At the Central Bank, we have anticipated this. In November last year, we raised the policy rate by 100 basis points [2.0%], and then we were rather surprised by the inflation rate which came out later on. After that in February [2022] in particular which triggered the 250 basis points [2.5%] adjustment in the policy rate”, he explained.

Additionally, he said, “this week, the MPC will be meeting, I do not want to preempt what the Committee will decide but I think is a very complicated issue. As we said inflation is nearly 24%, we need to take a position on what to do with the current policy rate at 17%”.

Dr. Addison added that the Central Bank has limited instruments that it uses to manage liquidity and interest rates.

“The role of the Central Bank in stabilizing has been very clear. I mean we have a limited set of instruments trying to manage liquidity and trying to manage interest rates, and that is what we have done in the last year or so.”

“As you heard, we have to be conscious of the impact of both external developments and internal developments on exchange rate. And if the market gets tighter and we see capital beginning to flow out, obviously, interest rates instruments will have to do part of the work”, he added.



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Source: www.ghanaweb.com
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