Drop in inflation will not result in reduction in prices just yet - Economist

A lecturer at the Economics Department of the University of Ghana, Dr Adu Owusu Sarkodie, has explained that the recent slow in the country’s inflation rate will not exactly result in a reduction in prices on the market.

According to him, what is currently being experienced is a cycle called disinflation, where inflation slows but still stays in a positive range.

He noted that it is not yet time to see the effect of the reduction in inflation on real market prices.

“Far from that, you are talking about disinflation, when the inflation rate is being reduced, that is disinflation. I think what people are talking about is deflation. We haven't gotten to the level of deflation where we expect prices to go down.”

Dr. Owusu Sarkodie, however, said it is welcoming news to know that inflation has reduced to 26%.

“But it is good news that we are experiencing disinflation, because as we all know inflation is the reduction in purchasing power. So, when the reduction in purchasing power has slowed, it is good news. Let us liken inflation to the speed of a car, if you are driving 100km per hour and you reduce the speed to 60km per hour, it does not mean that the car is reversed, it only means that the car is still moving forward but its speed has been reduced. So, what we can understand is that the speed at which prices increased has reduced or has slowed down, and I think it is better,” he added.

SSD/NOQ

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