In what appears to be a response to a recent article by The High Street Journal, Dr. Johnson Asiama, the newly appointed Governor of the Bank of Ghana (BoG), has announced his intention to pursue reforms in the central bank’s inflation targeting framework. The proposed changes aim to promote transparency and improve the effectiveness of monetary policy. While Dr. Asiama did not provide specific details about the reforms, he emphasized the importance of collaboration with other agencies in tackling inflation.
For years, the BoG has relied on its inflation-targeting strategy, which typically involves raising interest rates to curb rising inflation. Although the central bank believes this approach has been effective in controlling inflation, it has faced criticism from the business community and economists. Critics argue that high interest rates make borrowing costly, which increases the cost of doing business and leads to higher prices for goods and services.
In a recent report, The High Street Journal highlighted the business community’s close attention to the new Governor’s approach to interest rates, particularly the use of the monetary policy rate as a tool to combat inflation. Businesses have often expressed frustration with the BoG’s tendency to raise rates at times when they believe lower rates would stimulate growth.
Speaking at his swearing-in ceremony, Dr. Asiama, who previously worked at the central bank and served as Deputy Governor before stepping down in 2017, outlined his priorities for the BoG under his leadership. He identified the need to recalibrate the central bank’s monetary policy strategy as his top priority, stating, “The need to recalibrate our monetary policy strategy and enhance the policy framework to achieve our mandate more efficiently.” He further added, “Under my leadership, our policies will be clear, predictable, and responsive to emerging threats.”
One of the key criticisms of the BoG’s inflation targeting framework has been its perceived isolation from other government bodies. Businesses have often called for a more holistic approach to managing inflation, particularly regarding food prices and other essential goods. Dr. Asiama acknowledged this concern, promising greater coordination between the BoG and other government agencies. He remarked, “We shall coordinate policy efforts with other government agencies, for example, to manage food prices. We shall be consistent in our policy actions to avoid sending conflicting signals, as happened in the recent past, and we shall work to enhance monetary policy implementation.”
This new approach signals a potential shift towards a more collaborative and responsive central bank, which could accommodate alternative views from the business community and economists.
Experts like Dr. John Kwakye of the Institute of Economic Affairs and Togbe Afede XIV, who have previously advocated for a more business-friendly monetary policy, may now see hope in the new direction under Governor Asiama’s leadership.
The business community will be watching closely as Dr. Asiama rolls out his reforms, hopeful that a more transparent and coordinated inflation-targeting framework will lead to better economic outcomes for businesses and the broader Ghanaian economy.
