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Inflation Rate Firms at Multi-Year Highs

A Cedi on a freefall, coupled with a continuous upward adjustment in the prices of petroleum products dragged May’s inflation upwards to firm in multi-year highs after April’s inflation rate rose to its highest in 18 years. May’s inflation rate printed at 27.6%, up from 23.6% recorded in April. The inflation rate has stayed on an increasing trajectory over the past one year after it dipped to its lowest in more than 10 years in May, 2021 at 7.5%.

Data released by the Ghana Statistical Service indicated that for the second consecutive time, inflation on imported items beat that on local goods as the local currency continues to remain pressured, having closed May with a year-to-date loss of 18.95% against the US Dollar. The data further revealed that three out of the five items that recorded the highest inflation numbers were imported items. These were Grapes at 100.8%, Diesel at 81.1%, and Petrol at 62.0%.

Annual food inflation in May was reported at 30.1% after it rose from 26.6% in April. On a month-on-month basis, inflation on food items slowed down to 4.0% in May compared with 5.8% in April. Five out of the fifteen items in this group led by Oils and Fats at 52.0% recorded rates above the group’s average inflation.

Inflation on non-food and alcoholic beverages moved up from 21.3% in April to 25.7% in May, the fourth consecutive rise in 2022. Non-food inflation item’s contribution to the national inflation rate soared to 51.6% in May, up from 50.0% in April. The group’s inflation rate was led by Transport at 39.0% and Household Equipment & Maintenance at 33.8%.

Across the regions, the inflation rate ranged between 19.5% in the Upper East region and 31.2% in the Eastern region. Inflation on local and imported goods recorded increases with inflation on local goods surging to 27.3% in May from 23.0% in April and that on imported goods moved from 24.7% in April to 28.2% in May.

At the last monetary policy committee meeting held in May, the committee handed down a 200 basis points hike in the policy rate citing the need to decisively address the current inflationary pressures to re-anchor expectations. It is expected that the committee will continue to stay on its contractionary policy course in the face of heightened risks to the inflation outlook.

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