Marginal decline in inflation for June won’t affect MPC decisions – Economist

An Economist Professor has said he does not expect the recent figures for inflation for the month of June, to affect decisions made by the Monetary Policy Committee (MPC) of the central bank.

According to Prof. Peter Quartey, a reduction or increase in the monetary policy rate will only have negative ramifications on Ghana’s economy.

Speaking in an interview with GhanaWeb, Prof. Quartey advised for the central bank to exacerbate the current unfriendly economic environment as a result of the coronavirus pandemic.

“The government policy is to ensure that the cost of doing business is low, and that requires inflation and interest rates to be kept at the barest minimum; especially considering the situation we find ourselves in the pandemic. Every government wants to stimulate their economy, and so an increase in the policy rate is not the way to go as it would increase interest rates. And again, given the situation we find ourselves in, an increase in interest rate would not stimulate the economy; rather, it would worsen our plight. So, it is either the policy rate is reduced or maintained.”

“But reducing the rate also has repercussions. As we are aware, there has been some capital flight lately. Because of COVID-19, some foreign investors holding local bonds started exiting the market; and that put pressure on the exchange rate. So, if you reduce the policy rate further, it will quicken the likelihood of these investors selling off their bonds and exiting the market; and this will affect the exchange rate. So personally, having looked at these, I expect that the policy rate will be maintained,” Prof. Quartey added.

The Ghana Statistical Service (GSS) yesterday, July 15, 2020 announced figures for the national year-on-year inflation rate pegged at 11.2% for June 2020, which is 0.1 percentage points lower than last month May.

At the regional level, the overall year-on-year inflation ranged from 4.3% in the Upper West Region and Volta Region to 15.0% in all, but Greater Accra, Northern Region, and Upper East food inflation was higher than non-food inflation.

Especially in the Western Region, food inflation was 21.3% compared to 7.4% non-food inflation. For the Ashanti region, food inflation was 20.6% and 5.4% for non-food inflation subsequently.