Story by Franklin ASARE-DONKOH
A senior lecturer at the University of Ghana Business School (UGBS), Dr. Agyapomaa Gyeke-Dako, has commended the Monetary Policy team of the Bank of Ghana (BoG), for increasing the Monetary Policy Rate by 300 basis points from 19 percent to 22 percent to curb inflation.
According to her, the Monetary Policy team at the central bank’s decision to raise the Monetary Policy Rate by 300 basis points, from 19 percent to 22 percent, was very timely and believed it would go a long way to address the current rise in inflation.
The Monetary Policy Committee met on Wednesday, August 16, 2022, because of Ghana’s recent economic challenges. The last change in the policy rate was in May 2022.
In reacting to the Monetary Policy Committee’s decision to raise the Monetary Policy Rate by 300 basis points in an interview, Dr. Gyeke-Dako said the move by BoG is timely.
“We all understand that much of the inflation we are experiencing is coming from the supply side, given that we are having issues with fuel prices, market prices of oil, and many others. There is, however, a role that demand can play to bring down inflation. To tackle inflation from the demand side, we can increase our production capacity.
We know that the issue will take a while to be addressed. But in the interim, what the Bank of Ghana can do is to bring inflation down, and that can be achieved through increasing the policy rate. As we can see, the Bank of Ghana has moved to increase the policy rate. I think that this is timely, especially in the face of high food and non-food inflation. This is going to mop up liquidity in the country.”
Dr. Gyeke-Dako was of the opinion that aside from tackling inflation, the BoG’s move was to send a strong signal to investors that the current economic challenges are being tackled.
The senior lecturer at the UGBS is confident this timely move by BoG will go a long way to stabilise the economy “at least in the short-term”.
This move, according to her, will prevent investors from reversing their capital.
“People will also stop speculating because once people hear that the Central Bank is taking measures to address the depreciation of the cedi, much of the speculation will cease, and we know that speculation is a major contributor to the state we find ourselves in now.”