If your house is on fire, the first thing to do is to try and put the fire off. The Central Bank did the right thing by applying the brakes in the forex market to stabilise the rates. Looking forward, the CBG now needs to have mechanisms in place to control the forex market. Having a liberal exchange rate regime doesn’t imply that the CBG should sit around and watch rates hike without intervening. The most effective tool is the Open Market Operation which allows the CBG to intervene by way of INTERVENTION. Intervening in the market will not solve the problem as there is a speculative activity that is fueled by rent-seeking individuals who happen to have no need for Forex but to make a spread on their transactions.
The announcement by the Bank will create a confidence crisis and a short-term disruption in the immediate term. If handled effectively, the action of the bank will realign the forex market by sending a strong signal that forex is not a commodity to be traded but an instrument to facilitate international trade. Those who are not in the business of trade finance should not be in the business of speculation. June and July imports are most likely going to be priced higher thereby fueling inflationary pressure on basic commodities. I stand by the Governor to adjust the forex market for sanity in the best interest of the macroeconomic environment.