According to him, measures being put in place by the Bank of Ghana to halt the dwindling fortunes of the Cedi appear to be making headway as the local currency has stabilized significantly against the dollar and other foreign currencies.
The confidence in the cedi is beginning to manifest because of the drastic measures instituted by the Bank of Ghana, the Governor of the Central bank, Dr. Ernest Addison has said.
BoG governor, Dr. Ernest Addison
He said the monetary policy rate hikes, reversal of the regulatory reliefs, and the announcement effect of the fiscal measures have impacted positively on the FX market, and the local currency has regained some of the first-quarter losses.
Speaking at the 6th Ghana CEO Summit on Monday, May 30, 2022, Dr. Addison explained that although growth prospects remain positive, the macroeconomic challenges have dampened consumer and business confidence in the domestic economy.
He said "The upside risks to the inflation outlook are significant, and the second-round effects of upward adjustments in ex-pump prices and possible utility tariffs could further amplify inflation pressures in the outlook. We have heard several arguments by stakeholders on the Bank of Ghana’s response to the inflation problem, with some stakeholders arguing that these supply-side shocks cannot be resolved by raising the policy rate, especially because the inflation we are experiencing is imported.
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Ghana cedi
Pulse Ghana
"I took some time during the recent MPC Press Conference to explain that the Bank is very much aware that supply-side shocks are more difficult to deal with. The policy rate tightening emanates from the fact that the MPC assessed that, the shocks are becoming embedded in domestic prices."
"Oil price shocks for example send price impulses and spreads to other prices in the economy, and then affect economic agents’ expectations. The monetary policy response is directed at the second-round effects of these supply-side shocks. Consequently, the policy response to the challenges has been swift, which has seen the implementation of prudent monetary and fiscal policies to regain macroeconomic stability," he added.
Indeed, the inflation challenge has brought to the fore the importance of stability which we take for granted, and has shown clearly that macroeconomic stability is a necessary condition needed to enhance confidence and build back better from the pandemic/war effects, Dr. Addison noted.
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"The measures taken so far include the following: Policy rate hikes: Cumulatively since November 2021, the Bank’s MPC has raised the policy rate by 550 basis points. First, 100 basis points in November 2021, then 250 basis points in March 2022, and additional 200 basis points increase in May. Currently, the policy rate stands at 19 percent. These tight monetary policy actions are expected to dampen the heightened inflationary pressures in the medium term.
The United States dollar is trading at GH¢7.63 while the British pound sterling stood at GH¢9.82 as of Thursday, June 2, 2022.
