Inflation targeting to rein in the inflationary effects of global economic meltdown

Inflation targeting to rein in the inflationary effects of global economic meltdown
Masahudu Ankiilu Kunateh, Ghanadot

Accra, May 17, Ghanadot - The Ghanaian economy has not been immune to the contagion effects of the global economic crisis.

Although the impact has been relatively limited in the first three months of 2009, as the economy appears to be still experiencing high growth and the lingering effects of the colossal fiscal expansion in 2008, in spite of the high and volatile energy and food prices surge in that year.

Headline inflation data for April 2009 as released by the Ghana Statistical Service (GSS), on Friday was 20.56% up from 20.53% in March 2009.

The rate of inflation has been on the increase for four consecutive months this year (from January to April 2009). This current trend is a continuation of the rise in the rate of inflation that started in October, last year.

The trend observed in the first four months of this year is similar to that of the same period in 2008, but the rate of increase is much lower in the first quarter of 2009 relative to that of the previous year.

Indeed, the rate of inflation rose by 2.48 percentage points in the first four months of 2008 compared with 0.70 percentage points over the same period in 2009.

The Governor of the Bank of Ghana, Dr. Paul Acquah, at recent Monetary Policy Committee (MPC) press briefing admitted that the current inflation targeting framework introduced in the 2000s has yielded good results in the country.

Although there are some macro-economic imbalances in the Ghanaian economy, the Governor was hopeful that the current inflation targeting could be able to contain the imbalances.

Releasing the Consumer Price Index (CPI) for April 2009, the Government Statistician Dr. Grace Bediako intimated that the CPI had been primarily driven by the non-food sub-sector, contributing 55.09% of the CPI’s basket.

In April 2009 the rate of inflation for the non-food group together recorded 21.46% and the rate for the food groups was 19.23%. While, the corresponding figures for March 2009 were 22.00 and 18.50% for non-food and food groups respectively.

She observed that there were 11 sub-groups in the non-food group each of which had a different inflation rate, with the highest being recreation and culture, health, hotels, cafes and restaurants and alcoholic beverages.

The highest for the food group include milk, cheese and eggs, vegetables, potatoes and other tuber vegetables.

According to her, “The rate of inflation was higher in the urban areas than in the rural areas for the three consecutive months from February to April 2009. The urban and rural inflation rates for April 2009 recorded 24.41 and 20.59% respectively”.

Inflation rates recorded in the regions range from 24.60% to 12.38% for both Greater Accra and Western regions, while, five regions recorded inflation above the national rate of 20.56%.

Ghanadot