Bank Formally Adopts Inflation Targeting

 

THE BANK of Ghana (BoG) has formally adopted an inflation-targeting framework for its monetary policy operations to track underlying inflation, using a core measure of the Consumer Price Index (CPI) inflation, which excludes energy and utility prices.

This was announced by the Governor who is also the Chairman of the Monetary Policy Committee (MPC), Dr. Paul A. Acquah at a press briefing by the MPC on Monday.

The Governor noted that BoG has been pursuing an inflation targeting regime for the last few years and has now chosen to publicly announce this so that the Bank can be held accountable for its mandate of delivering price 'stability under the Bank of Ghana Act 2002.

He noted "with this, Ghana joins South Africa as the only countries in Africa pursuing inflation targeting."

According to him, a key ingredient for the success of inflation targeting was transparency, adding that the MPC process ensures this through the regular publication of its economic reports and issues relating to the MPC's interest rate decision.

He stressed, "The Bank of Ghana would also now publish regularly, inflation reports for the Information of the public."

Also, the bank has announced that the Credit Reporting Bill has now been passed into law to provide a legal and regulatory framework for credit reporting in Ghana and also provide timely, accurate and up to date information on the debt profile and repayment history of borrowers.

BoG stated that the availability of credit information is crucial for the development and maintenance of an effective financial sector hence, "the lack of a credit information system therefore increases the risk of lending, and causes financial institutions to provide less credit."

Additionally, the Act is designed to promote orderly development of a credit reporting system and also promote public trust in credit bureau operations and specifically provides for the licensing of private credit bureaus.

More importantly, the Act gives BoG the authority to set up a public bureau, regulate the activities of credit bureaus and establish guiding principles for the conduct of credit reporting system.

The Act further provides for credit data submission, data management and protection, dissemination and "seeks to strike a balance between the rights of borrowers on the one hand and the need to share credit information effectively, on the other."

The Bank however notes that credit reports prepared by a credit bureau is restricted under the Act while in accordance with the principle of reciprocity, only financial institutions who submit credit information to a credit bureau and show evidence of the customer's consent to the issuance of a credit report would be eligible to access a credit bureau's data.

"Financial institutions that are eligible to access a credit bureau's database may only do so for credit risk management purposes including the assessment of a credit application", BoG noted, stressing, "The Bank of Ghana is the regulatory authority for the Credit Reporting Act."

Link to allAfrica.com: Ghana: Bank Formally Adopts Inflation Targeting (Page 1 of 1)