BoG Adopts Inflation Targeting Regime

The Bank of Ghana (BoG) has announced that it has formally adopted an inflation targeting framework for its monetary policy operations.

The Governor of the BoG, Dr Paul Acquah, told newsmen at a press conference organised by the Monetary Policy Committee (MPC) of the bank that the bank had been operating an inflation targeting regime for a few years.

Dr Acquah said it was now coming out publicly because it wanted the public to hold the bank accountable for its mandate of delivering price stability under the Bank of Ghana Act 2002.

The governor, who is also the chairman of the MPC, said transparency was key to the success of the inflation targeting framework and that the MPC would embark on regular press encounters and publication of economic reports.

Governor Acquah said publishing inflation reports would also be a regular activity, adding that to track underlying inflation, the BoG would use a core measure, the consumer price index (CPI), which excludes energy and utility prices.

Giving details of the CPI for the first quarter, the governor said inflation declined by 0.7 percentage points to 10.2 per cent, saying the decline was driven by non-food prices. In April inflation rose to 10.5 per cent, due to increases in food prices.

The governor said using the core measure of inflation, excluding energy and utility prices from the basket, however, the rate eased by 0.3 percentage points from 9.4 per cent in December last year to 9.1 per cent at the end of March, this year.

The figure went up to 9.2 per cent in April, adding that another core measure, which excluded energy, utility and selected volatile food items, also showed a similar pattern.

Answering questions on the impact of the power management, Dr Acquah explained that, although the real impact could not be readily measured, the impact was dependent on whether a sector was heavily depended on energy and how companies in that sector responded.

The governor said in spite of the fact that attempts to produce own power to supplement the shortfall from the grid could increase operating costs, the overall effect could only reduce a higher economic growth and not disturb the current projections.

Story by Samuel Doe Ablordeppey