Inflation Rate Closes 2020 at 10.4%

The rate of inflation failed to firm within the Bank of Ghana’s (BoG) medium-term inflation target band of 8.0% ± 2.0% after it climbed from 9.8% in November to end the year at 10.4%, its highest since October. The jump came on the back of significant price increases in some food & non-alcoholic beverages as consumption activities surged in the yuletide. National inflation, however, averaged 9.9% buoyed by low inflation figures in the first three months of 2020.

Food contributed a little over 55% to the national inflation in December which constituted the highest contribution recorded since April when the full impact of COVID-19 hit the economy. The Ghana Statistical Service maintains that the increased rate of food inflation is the predominant reason for the increased overall inflation, as without the increase, the December inflation would have been lower compared to last month.

After recording a decline last month, the inflation rate for the food & non-alcoholic beverages group rose by 240 basis points (bps) from 11.7% in November to 14.1% in December. This was led by 61.3% and 30.9% month-on-month increases in “Diary products & egg” and “fish and other seafoods” respectively. “Vegetables, tubers, plantains” at 24.2% was among 5 other sub-group items that recorded rates above the group’s inflation rate.

The inflation rate on the non-food & alcoholic beverages category fell from 8.3% in November to 7.7% in December as “Education” and “Recreation, sports & culture” posted the biggest month-on-month decreases. “Housing, water, electricity, gas” was the only sub-group item that recorded a rate above the group’s average inflation figure.

Across the regions, the Greater Accra recorded the highest inflation with a rate of 14.1% while the Upper West recorded the lowest at a rate of 2.1%. Inflation on both locally produced goods and imported goods rose from 11.5% and 5.6% in November to 12.1% and 6.1% in December respectively.

As the monetary policy committee of the BoG prepares to meet to review the performance of the economy to position the policy rate going forward, it is expected the jump in the recent inflation reading will guide the committee to take a cautious stance in determining the policy rate