BoG to review inflation target framework

By
Elorm Desewu
The
Bank of Ghana, (BoG), is considering reviewing its inflation target band of 8±2
percent towards a rate which is more appropriate for the country.
The
Ghana Statistical Service, announced 7.8 percent year on year inflation for
August 2019 which came about because of the rebasing and the new Ghana Living
Standards survey.
“I
have said this before that when your trading partners’ inflation is below 5% and
you have 8% inflation, you are not competitive. So, we must aim to drive
inflation closer to the inflation rates of our trading partners. If you agree
with this argument, then we should be looking at setting a lower medium-term
target for inflation.
Whether
it should be 5% or 6% is where the debate will be, but I expect that by the end
of this medium-term period, we would probably have to reset the target for
inflation lower”, said the governor of
BoG, Dr Ernest Addison.
The
new inflation number of 7.8% means the country’s inflation rate is slightly
below the medium-term target of 8±2 percent set by the BoG.
Following
the revision of the Consumer Price Index by the Ghana Statistical Service to
reflect weights from the Ghana Living Standards Survey of 2017 and a revised
base year of 2018, a new measure of headline inflation was estimated at 7.8
percent for August 2019, moving it below the central path of the Bank of
Ghana’s medium-term inflation target of 8±2 percent.
Food
inflation was reported at 8.2 percent and non-food inflation was at 7.4
percent. However, underlying inflation, measured by core inflation (CPI
excluding utility and energy) inched up slightly, alongside some moderate
pick-up in inflation expectations from businesses, consumers, and from the
financial sector.
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