The Governor of the Bank of Sierra Leone has said targeting inflation can allow developing countries to significantly reduce the volatility of inflation on economic growth, nominal exchange rate and foreign currency reserves.
Governor Sheku Sambadeen Sesay made this statement while delivering the key note address at the opening ceremony of the regional seminar on “Modeling and Forecasting for Inflation Targeting”, organized by the West African Institute for Financial and Economic Management (WAIFEM) and the Centre for Central Banking Studies of the Bank of England.
Updating his audience on the history of inflation targeting as a monetary policy management tool and its emergence as a reliable approach for confronting inflation, over monetary aggregate and exchange rate management, Governor Sesay dilated on the initial conditions that should support the decision to adopt inflation targeting.
He defined Inflation Targeting as a monetary policy which makes provision for an announced numerical target and is transparent and accountable.
He put forward four categories of essential conditions for the use of Inflation Targeting that included Central Bank’s legal mandate, Central Bank accountability to the public, macroeconomic and financial stability.
Governor Sesay apprised his audience of the importance of a clear legal mandate of the Central Bank to pursue price stability as a primary objective of monetary stability. He added that the Central Bank should be seen to support the general economic policy of the Government and promote economic growth and an effective and efficient banking and credit market in the country, independent of the Government or any other authority. He also stressed the importance of accountability of the Central Bank to the public for its actions especially in pursuit of Inflation Targeting.
Governor Sesay also reminded all that the external position of prospective Inflation Targeting country should show sufficient stability to enable monetary policy to focus on pursuing the inflation target over time without being sidetracked by adverse developments in the foreign exchange market.
He informed his audience that the conditions highlighted will not be sufficient for inflation targeting. Therefore they must be supported by capacity building through acquiring the requisite competence to make credible inflation forecast.
The Governor expressed his gratitude to Professor Akpan H Ekpo, Director General of WAIIFEM and pledged his support for the activities of WAIFEM
Speaking earlier, the Director General of WAIFEM Prof. Akpan H Ekpo reminded the audience that the course was designed to upgrade the knowledge and analytical skills of Economist with operational responsibility for preparing policy papers, statistical data, forecasts and other inputs.
The seminar ends today.
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