Inflation Rate Dips to Multi-Year Low at 7.5%

The inflation rate tumbled to a more than 5-year low in May, 2021 mainly on the back of a base-drift effect following hikes in the prices of some food and non-food items over the same period last year. May’s rate of inflation was reported at 7.5%, down from 8.5% in April. Compared to last year, the inflation rate plunged by 350 basis points (bps) from a rate of 11.3% recorded last year.

The latest inflation figures for April and May indicates that consumer prices are gradually inching into pre-COVID levels as price pressures on some food items slow down. The Ghana Statistical Service (GSS) notes that food inflation is decreasing in its contribution to total inflation after it contributed 32.3% in May, the lowest contribution observed since the rebase in 2018.

The inflation rate on food and non-alcoholic beverages extended its downward trajectory in May as it further declined from 6.5% in April to 5.4%, its fourth consecutive dip in 2021. Seven sub-group items including ‘milk and other dairy products’ at 13.5% recorded rates above the group’s inflation rate whilst water recorded the biggest year-on-year change from 0.1% to -0.2%.

Non-food and alcoholic beverage inflation softened in May after surging in March and April. It slowed down from 10.2% in April to 9.2% in May despite transport inflation recording a substantial rate surge. The climb in transport inflation according to the GSS is driven by the inflation of diesel (37.7% y-o-y) and petrol (34.0% y-o-y).

Across the regions, Greater Accra recorded the highest inflation at a rate of 12.3% while Eastern and Western recorded the least at rates of 2.6%. Inflation on local and imported goods both came in at 7.3%, declining from 8.7% and 7.4% in April respectively.

The drastic fall in the inflation rate is in consonance with the central bank’s projection that inflation is expected to firm in the medium-term inflation target band of 8.0% ± 2.0% in the near term. A stable inflationary outlook thus informed the Monetary Policy Committee to deliver a 100 bps cut in the policy rate to reflect the future price anticipations.