Business News of Friday, 19 August 2022
Source: www.ghanaweb.live
2022-08-19Ghana Cedi still a junk currency – Prof Hanke on BoG's policy rate hike
Professor Steve Hanke
Professor of Applied Economics at the Johns Hopkins University, Steve Hanke, has reiterated that the fast-depreciating Ghana Cedi remains a junk currency.
In a Twitter post on August 18, Professor Hanke said he was not surprised at the Bank of Ghana’s decision to increase the policy rate from 19% to the current 22%.
The professor who has been measuring
Read full articlethe rate of the currency depreciation for a number of countries said per his own analysis, the Ghanaian currency had depreciated by 41% against the United States dollar since January 2020.
In his view, the government must institute a currency board to check the rate of depreciation.
“#Ghana's central bank has raised the interest rate by 300 bps to 22%. No surprises here. The Ghanaian #cedi is junk. The cedi has depreciated by ~41% against the USD since Jan. 1, 2020. GHA must mothball its central bank & install a currency board, NOW,” Professor Hanke tweeted.
The Central Bank after an emergency meeting on August 17, 2022, to address the hike in inflation rates increased the policy rate.
A BoG statement read in part, "Under the circumstances, and considering the risks to the inflation outlook, the Committee decided on a 300 basis points increase in the Monetary Policy Rate to 22 percent."
It also said, "The latest consumer price index release showed that the headline inflation accelerated further for the eleventh consecutive month to 31.7 percent in July 2022, from 29.8 percent in June 2022. This was driven by both food and nonfood price pressures.
"Food inflation rose to 32.3 percent in July 2022 from 30.7 percent in June 2022. Similarly, non-food inflation increased to 31.3 percent from 29.1 percent in June 2022, contributing 55 percent to the rise in headline inflation in July 2022”.
The Cedi has in recent times been on a free fall with exchange rate nearing GH₵11 to a US dollar at some forex bureaus.
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