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The Ghana International Trade and Finance Conference (GITFiC) is predicting that Ghana’s inflation could be affected by the recent hike in interest rates by the European Central Bank.
The Bank on Thursday, September 14 raised its key interest rate to a record 4 percent, the 10th upward review of the rate.
In a statement issued on Sunday, September 17, GITFiC said the decision by European Central Bank could have a devastating effect on inflation, which dropped to 40.3%.
“Changes in exchange rates and capital flows can affect domestic inflation in Ghana,” it said.
“A depreciating Cedi can contribute to imported inflation if the cost of imports rises, which can have implications for the domestic cost of living.”
It also cited international exchange rates, capital flows, commodity prices, and ballooning of costs some of the areas to be affected by the decision.
“An increase in the ECB’s MPR will lead to a stronger Euro, which may affect the exchange rate between the Euro and the Ghanaian Cedi,” it stated.
“A stronger Euro could make Ghanaian exports more expensive for Eurozone countries, potentially reducing demand for Ghanaian goods and services vis a vis balance of payment.”
SOURCE: 3 NEWS ONLINE