Increasing policy rate will bridge inflation gap, IEA
Adjustment of policy to restore calm in markets, IEA
The Institute of Economic Affairs (IEA) has entreated the Bank of Ghana (BoG) to increase the policy rate by either 100 basis points or 150 basis points.
Increasing the basis points by 100 or 150 means that the policy rate will move to 20 percent or 20.5 percent respectively.
IEA in a press statement sighted by GhanaWeb explained that increasing the policy rate will help close the soaring inflation gap.
“… We are minded to suggest that the MPC should increase the policy rate by a further 100-150 basis points, taking it to 20.0-20.5%. This adjustment will narrow the inflation-PR gap, although the real PR will still remain negative”, the IEA said in a statement.
“Further, the adjustment will signal the MPC’s unwavering commitment to fighting the inflation and bring it under control. The adjustment will also send the right signal to, and help calm, the markets,” the Institute added.
IEA's proposal comes at a time that the Monetary Policy Committee of the Bank of Ghana is holding its 107th meeting.
It would be recalled that on May 23, 2022, the Monetary Policy of the Bank of Ghana Monetary Policy Committee reviewed the policy rate by 200 basis points from 17 percent to 19 percent.
Governor of the central bank, Dr. Ernest Addison, speaking at a press conference on Monday, May 23 explained the move was meant to stem the high inflation which has been surging in recent months.
Inflation at the time [April] was 23.6 percent but currently, inflation stands at 29.8%.
The Ghana Statistical Service (GSS) on Wednesday, July 13 announced that inflation for June hit 29.8 per cent.
The latest report released by GSS and sighted by GhanaWeb showed that the drivers of the country's inflation were largely driven by food and non-food products.
At a press conference in Accra, Government Statistician, Professor Samuel Annim, pointed out that food inflation increased to 30.7% in June 2022, from 30.1% recorded in May 2022 whiles non-food inflation surged from 3.4% to 29.1% in June 2022.
ESA/FNOQ
Bank of Ghana Governor, Ernest Addison