BoG revises inflation forecast
By Elorm Desewu
The Bank of Ghana has revised its medium term inflation target
of 8±2 percent projecting that it would return to the target band by second
quarter of 2021 based on corrective fiscal measures being introduced by the
government in the near term.
The Bank of Ghana’s latest forecast shows that inflation is
currently above its upper limit, driven mostly by food prices. Adjusting for
the unusual noise in the food inflation, the indications are that underlying
inflationary pressures are stable.
“The Bank projects a return of inflation to the medium-term
target band by the second quarter of 2021, conditional on corrective fiscal
measures being introduced in the near-term” according to the governor of BoG,
Dr Ernest Addison.
The Monetary Policy Committee maintained the policy rate at
14.5 percent due to a widened budget deficit and a residual financing gap,
which requires some monetary restraint to preserve the anchors of macroeconomic
stability.
There have been some pressures on headline inflation. After
remaining flat at 7.8 percent in the first quarter, inflation jumped to 11.2
percent in the second quarter. This sharp increase was driven in large part by
food prices, which spiked in response to the panic-buying episode preceding the
partial lockdown that was announced at the end of March 2020.
Food prices continued to increase from 8.4 percent at the end
of the first quarter to 13.9 percent at the end of the second quarter. Non-Food
inflation also rose from 7.4 percent to 9.2 percent, but this has been at a
much slower pace than food prices.
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