The International Monetary Fund has urged central banks to guard their credibility and independence in the wake of rising inflation.
The IMF said these two values will be critical to ensuring the effectiveness of the policy tools central banks deploy during this period.
The world is facing a new round of inflationary pressures on the back of rising energy costs due to the war on Iran.
This has led to increases in food prices and the cost of crucial services like transportation.
This is threatening to erode hard-fought gains made by a country like Ghana.
Ghana has managed to lower inflation from as high as 23% to under 5% in a year and was targeting a reduction in interest rates to increase the availability of cheap capital, but recent shocks from rising fuel prices have led to an increase in inflation and forced the Bank of Ghana to adopt a cautious approach.
Presenting the World Economic Outlook at the ongoing IMF/World Bank Group Spring Meetings in Thailand, the Director of the Research Department of the IMF, Silvana Tenreyro, said central banks need to take a restrictive stance. This is intended to rein in demand.
Ms Tenreyro said central banks must focus on their mandates with regard to price stability.
She said the response of each central bank must take into account its country’s peculiar circumstances, especially levels of inflation, labour market tightness and exposure to technology and commodity shocks.
Written by Sena Nombo, Bangkok, Thailand
