Inflation Closes the First Half of the Year at 7.8%

The inflation rate for June climbed up to end months of a downward streak as price pressures in some key items drove the prices of food items upwards. The rate of inflation went up to close the first half of the year at 7.8%, up from 7.5% recorded in May. On a year-on-year basis, the inflation rate declined by 340 basis points (bps) from 11.2% recorded over the same period last year.

Despite the uptick in the recent inflation reading, consumer prices are expected to remain within the government’s targets as general price levels stabilize compared to last year. The Cedi’s relative stability in the first half of the year has partly contributed to the stability in consumer prices. This has helped to normalize price hikes in locally produced items resulting from price increases in foodstuff and petroleum products.

Food inflation recorded its first jump in 2021 as it rose from 5.4% in May to 7.3% in June. ‘Milk and other dairy products’ recorded the highest year-on-year inflation at 13.6%, up marginally from 13.5% in May. ‘Water’ remained in the negative ranges but is slowly picking up momentum.

Inflation on non-food items declined by 100 bps from 9.2% in May to 8.2%. ‘Housing and utilities’ sub-group recorded the largest month-on-month price decline from 19.9% in May to 14.2%. Only two sub-groups including ‘Transport’ recorded rates above the group’s inflation figure.

Across the regions, Greater Accra recorded the highest inflation at a rate of 12.5% while Western recorded the least rate at 1.1%. Inflation on local items rose to 7.9% whilst that on imported items tumbled to 7.0%.

The jump in the inflation reading is unlikely to trigger any adverse policy shift as the inflation rate remains well footed in the central bank’s medium-term inflation target band of 8.0% ± 2.0%. The monetary policy committee is expected to continue to stay on a cautious stance going forward.