Director of Research at the Bank of Ghana, Dr. Philip Abradu-Otoo has noted that the method used to determine the inflation rate juxtaposed against the monetary policy rate in the country is effective.
Inflation targeting is a central bank strategy of specifying an inflation rate as a goal and adjusting monetary policy to achieve that rate. Inflation targeting primarily focuses on maintaining price stability but is also believed by its proponents to support economic growth and stability, according to Investopedia.
The Institute of Economic Affairs (IEA) in an earlier statement noted that the central bank’s inflation-targeting framework was inefficient and needed to be revised.
However, the producer price inflation rate for April increased to 31.2%.
It is in this light that Dr. Abradu-Otoo has noted that 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.”
The Governor of the Bank of Ghana has noted that the current inflation rate is baffling.
The Central Bank has revised the monetary policy rate from 17% to 19% to deal with the rising inflation.
Governor of the Bank of Ghana, Dr. Ernest Addison