Adjunct Senior at the Institute of Economic Affairs (IEA), Dr Eric Osei-Assibey, has advocated for a rethinking of Ghana’s inflation targeting (IT) regime, in order to accelerate the nation’s socio-economic development.
He said, if Ghana’s IT regime was to be maintained, then we need to solidify the fundamentals, stating that; “we need to make sure the productive sectors of this economy is good. We are exporting more, we have favourable terms of trade and our currency is strong, just like in developed countries, so that inflation target will be relevant to us.
“If IT is to continue, then there is the need to strengthen the economic fundamentals, otherwise an alternative policy that is in sync with our development agenda should be sought”.
Dr Osei-Assibey gave the recommendation in his presentation at an IEA Roundtable in Accra; on the theme “Inflation Targeting Under Weak Macroeconomic Fundamentals: Does Ghana Need a Monetary Policy Re-direction?
He said IT had often been successful in keeping inflation levels low and avoiding many of its negative effects.
He said IT is an economic policy, through which a central bank publicly determines a target inflation rate and then attempts to steer actual inflation towards the target.
Dr Osei-Assibey said IT is a transparent way to explain interest rate policy and to anchor consumers’ expectations about future inflation, adding that, on the other hand, if the rule was implemented very strictly, an IT could severely limit the central bank’s flexibility in responding to changing economic