The Agbogbomefia of Asogli State, Togbe Afede XIV, has asked the Bank of Ghana (BoG) not to jubilate over the drop in inflation since the figures have not impacted prices on the market.
He says the drop in the figures were determined by what occurred the previous year, which were expected.
In a statement issued Tuesday, December 26, 2023, he said there is nothing to celebrate over the decline in the rates because it was an obvious characteristic of year-on-year inflation.
“It was interesting to hear Bank of Ghana (BOG) officials pat themselves on the back because yearon-year inflation had dropped to 26.4% in November 2023, from 35.2% in October 2023 and 54.1% in December 2022. This trend should have been expected, I thought, because of the massive price increases and exchange rate depreciation that were recorded during the corresponding periods in 2022.
“It is a fallacy of year-on-year inflation numbers – they tend to be influenced a lot by what happened one year ago. That is why year-on-year inflation may rise in a particular month even when the general price level has fallen in that month, and vice versa,” he indicated.
According to the business mogul, “you cannot describe what happened to prices and exchange rates towards the end 2022 as “a blip” when the effects are still with us. The markets simply adjusted to the rot in the system. A return to the relatively lower inflation rates of the past does not mean prices have become lower. Year-onyear inflation rate of 26.4% in November 2023 is not worthy of celebration.”
With government always blaming the economic woes on the COVID-19 pandemic and the Russian invasion of Ukraine, Togbe indicated that “Zambia and Kenya, exposed to the same global shocks, recorded 12.9% and 6.8%, respectively. And the US dollar is currently trading at more than 150% of its price (cedis) in June 2022.”
He, however, noted that the Bank of Ghana’s decision not to set the policy rate above year-on-year Consumer Price Index is the right way to go, despite the policy probably being influenced by the astronomical increase in the inflationary rates that might have crippled the central bank.
“But I am glad that Bank of Ghana (BOG) has finally bitten the bullet, accepting that it does not have to set its policy rate above “past inflation”. After decades of insisting that its policy rate must be fixed above year-on-year changes in the consumer price index (CPI) to ensure “positive real returns” to investors, BOG had over the past several months, following the collapse of our economy, kept their policy rate below the year-on-year changes in the CPI. Maybe it was the case that they just could not set the policy rate above the recent hyperinflation rates,” he said in portions of his statement titled, “Bank of Ghana Has Failed Us”.
The article can be read in full here.
