First Deputy Governor of the Central Bank, Dr Maxwell Opoku-Afari, has said Ghana’s economy is entering a new phase of its macroeconomic development with well-anchored low inflation expectations.
According to Dr Opoku-Afari, the Central Bank’s inflation forecast, indicates strongly low inflation expectations going forward – possibly in the short-term.
The First Deputy Governor’s assertion follows the return of headline inflation to pre-Covid levels and marginally below the medium-term band target of 8±2 percent.
Headline inflation, in the first quarter of 2020 jumped from 7.8 percent to 10.6 percent in April and further to 11.4 percent in July 2020, outside the Bank’s inflation medium term target band of 8±2 percent — the first time in over two years.
The sharp rise in inflation was partly the result of panic-buying prior to the partial lockdown in the largest cities, which pushed up food prices significantly from 8 to around 15 percent while non-food inflation remained largely contained.
The pandemic therefore presented a combined demand and supply shock to the Ghanaian economy, which required close coordination and implementation of monetary, fiscal, and macroprudential policies to limit its impact on the broader economy.
Delivering a keynote address at the Journalist for Business Advocacy Financial Literacy Training Workshop themed; Understanding monetary policy in post pandemic era, Dr opoku-Afari posited that the Central Bank will continue to implement policies consistent with its inflation targeting framework to entrench the current low inflation environment.
Presently, the official inflation rate for end-May 2021 according to the Ghana Statistical Service (GSS) is 7.5 percent.
A fall of 1 percentage points compared to the 8.5 percentage points inflation rate recorded for April 2021.
The fall in inflation rate resulted in a 150 basis points cut in the policy rate of the BoG given the positive or direct relationship between inflation and the policy rate of the Central Bank.
With inflation expected to remain low in the short-term, the Central Bank’s policy rate will also be expected to be maintained at the current level or marginally be reduced.
Speaking also at the training workshop was President of the Journalists for Business Advocacy (JBA), Suleiman Mustapha, who opined that monetary policy implementation by the BoG over the next couple of years, will have to underpin efforts to bring Ghana’s economy back to its inherent capacity after falling well below optimum levels, due to the slump in economic activity posed by the pandemic.
According to him, monetary policy has to be implemented in such a way that it does not stoke the fires of inflation which is the key consideration for the Bank of Ghana as an inflation targeting central bank.
