Inflation Rate Opens 2021 at 9.9%

The inflation rate inched into the Bank of Ghana’s medium-term inflation target band of 8.0% ± 2.0% after it climbed to 10.4% in December, 2020. The rate of inflation for the first month of 2021 was reported at 9.9% as economic activities begin to normalize. Year-on-year, the inflation rate surged by 210 basis points (bps) from 7.8% recorded over the same period last year.

Food remained as the predominant driver of national inflation figures as it continues to contribute more to the year-on-year inflation rates compared to non-food inflation items. As compared to last month, food contributed 57% in January against 59.1% in December, an indication of a gradual easing of price pressures on food items.

The inflation rate on food and non-alcoholic beverages declined by 130 bps to 12.8% in January from 14.1% in December after ‘fruits & vegetables’ posted the biggest month-on-month decline. ‘Vegetables, tubers, plantains’ at 20.3% was among 6 other sub-group items that recorded rates above the group’s inflation rate. ‘Water’ at -0.8% recorded the least inflation rate in this category.

The inflation rate on non-food and alcoholic beverages group was unchanged from last month’s inflation figure of 7.7%. ‘Housing, water, electricity, gas’ at 21.0% was the only sub-group item that recorded a rate above the group’s average inflation figure. ‘Education’ at 0.3% was among 11 other sub-group items that recorded rates below the group’s average inflation rate.

Across the regions, Greater Accra recorded the highest inflation with a rate of 15.1% while Volta recorded the least at a rate of 1.9%. Inflation on local goods eased from previous month’s rate at 12.1% to 11.3% whilst that on imported goods remained at 6.1%.

At the last monetary policy committee meeting, the committee noted that whilst the risks to the inflation outlook remain broadly contained in the near-term, there are short to medium-term risks emanating from the fiscal expansion and rising crude oil prices. Based on this, the committee stalled the policy rate for the fifth consecutive time. Going forward, it is expected that the MPC will continue to stay its cautious stance.