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Dr Ernest Addison, the Governor of the Bank of Ghana (BoG) has described Ghana\u2019s current inflation rate as baffling. Speaking in a virtual interview Monday before the Bloomberg Invest: Focus on Africa conference,\u00a0Dr Addison\u00a0said, \u201cIt\u2019s 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.\u201d<\/p>\n
\u201cIt\u2019s a very complicated environment, as you are aware we have come out of\u00a0COVID-19. But Ghana, fortunately, was able to weather the impact of COVID well without recording high-interest rates,\u201d he added.<\/p>\n
\u201cA lot of the shocks that we are seeing now tend to be supply-side in nature,\u201d he said.<\/p>\n
\u201cWe are trying to manage liquidity very tightly to ensure that we don\u2019t have excess liquidity fueling further inflation and an exchange-rate depreciation\u2026\u201d<\/p>\n
\u201cIf markets get tighter and we see capital beginning to exit, the interest-rate instrument will have to do part of the work.\u201d<\/p>\n
He added, \u201cWe expect that inflation will be tapering off for the rest of the year.\u201d<\/p>\n
Increase policy rate
The Institute of Economic Affairs (IEA) has urged the Bank of Ghana (BoG) to increase the policy rate by another 200 basis points to 19.0%.<\/p>\n
According to the IEA, this will help narrow the gap with inflation and \u201calso ease to some extent the risk of foreign currency outflows.\u201d<\/p>\n
The IEA in a statement said, \u201cthe adjustment will also provide some assurance to the markets that the\u00a0BoG\u00a0is committed to addressing the resurging inflation. Anything less than this may be interpreted as a weak response, which may be concerning to the markets.\u201d<\/p>\n
\u201cThe BoG must buttress its decision with an effective communication strategy to make its intentions clear so that the Bank can rally the markets behind the decision,\u201d the statement added.<\/p>\n
\u201cIt has to be said that the above discussion is made in the context of the IT framework that BoG signed on to since 2007.\u201d<\/p>\n
Source: asaaseradio.com<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Featured Video\n<\/p>\n\n
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