End-year inflation likely to exceed 40% – Economist

An Economist has predicted that national year-on-year inflation will exceed 40% this year because the inflationary pressures that are already set into motion will continue for the rest of the year.

Dr. Kwadwo Opoku, a Research Fellow at the Centre for Social Policy Studies (CSPS) at the University of Ghana, indicated that per “my little projection”, inflation will reach the peak around February next year before it starts declining.

He underscored that should the Bank of Ghana’s measures yield any results, then inflation may end 2022 around 41% or 42%.

Commenting on the Central Bank’s previous monetary policy measures, Dr. Opoku noted that he did not agree with the MPC’s decision to hike the policy rate to 22% and also increase the minimum requirements.

He explained that these measures come at a cost on output and employment.  More importantly, the Economist iterated that most of the price pressures that the country currently battles are not demand-driven.

“I agree they really need to do something about it but from my perspective, I think it is not necessary because it’s not increase in demand. Usually, the reason why the MPC has been increasing the policy rate is to fight the depreciation of the Cedi. Now, it’s a little bit stable because you fight inflation at the cost of output and employment” he said.

As a result of the previous policies rolled out by the Central Bank to contain galloping inflation in the country, Dr. Opoku noted that banks are constantly complaining of liquidity constraints.  Thus, banks are lamenting that they do not have enough resources due to the increase in the reserve requirements.