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BoG to IEA: We can’t abandon inflation targeting framework

The Institute of Economic Affairs last week described the Bank of Ghana's inflation-targeting framework as inefficient after producer price inflation rate for April increased to 31.2%

Dr Philip Abradu-Otoo, director of research at the Bank of Ghana (BoG)has said its inflation framework targeting is effective contrary to claims that it is not so.

The Institute of Economic Affairs(IEA) last week described the Bank of Ghana’s inflation targeting framework as inefficient after the producer price inflation rate for April increased to 31.2%.

Speaking with Kwaku Nhyira-Addo on the Asaase Breakfast Show on Tuesday ( 24 May), Abredu-Otoo says the Bank of Ghana cannot abandon its inflation-targeting framework.

“I have heard in many quarters including the Institute of Economic Affairs saying that we should abandon our inflation targeting framework and I ask how do you abandon such a framework when such a framework contains all these beautiful frameworks that every central bank should have to conduct a meaningful analysis on inflation and growth?” 

He said, “One thing that I must also add is that if you look at the inflation targeting framework; if you look at the interest rate function that the central bank uses in making its decision, it is not purely a function that is dependent on inflation. But it is a function that is dependent on growth, so it’s a combination of inflation and growth.”

“It is clear to me that our inflation targeting framework is the way to go. The decisions we take also take into consideration real-time factors and opinions within the sector.”

Listen to Dr Philip Abradu-Otoo in the video below:

Policy rate now 19%

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) on Monday (23 May 2022) raised the policy rate by 200 basis points to 19% amid increases in oil and food prices.

Speaking at the 106th MPC press briefing in Accra, the Governor of the Bank of Ghana, Dr Ernest Addison, said the move is expected to control rising inflation and check the rapid depreciation of the cedi as well as rising food prices.

He said, “The committee took the view that it needed to decisively address the current inflationary pressures to re-anchor expectations and help foster macroeconomic stability.”

Dr Addison said, “… the heightened uncertainties surrounding the inflation dynamics has weighed heavily on the domestic environment and significantly depressed business and consumer sentiments.”

In March, the BoG raised the policy rate by 250 basis points to 17% amid increases in oil and food prices.

Fred Dzakpata

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