Inflation Climbs to Multi-Year Highs

As the world economy continues to battle with rising consumer prices exacerbated by supply chain disruptions following Russia’s invasion of Ukraine and increase in energy costs, Ghana’s inflation once more rose in consonance with global trends, rising to its highest in nearly 20 years. Inflation in June printed at 29.8%, up from 27.6% in May. On a year-on-year basis, the rate of inflation has strengthened by 22 percentage points from 7.8% recorded over the same period last year.

The sharp and persistent rise in consumer prices comes as prices on imported items soar following a sustained decline in the value of the local currency against its major trading partner currencies and as prices of essentials escalate on the world market. Data released by the Ghana Statistical Service has revealed that three of the top five inflation items were imported items. These included Grapes at 111.3%, Diesel at 99.7%, and Petrol at 69.3%.

Food inflation in June recorded the slowest monthly growth since the start of the year, coming in at 30.7%, from 30.1% recorded in May. This comes as some food items such as Vegetables, Ready-made food, and Fruits & Nuts recorded slower rates compared to that in May. Key drivers of food inflation in June were Oils & fats at 58.0%, Water at 43.2%, and Cereal products at 38.4%.

Non-food inflation strengthened by 340 basis points from 25.7% in May to close the first half of the year at 29.1%. Month-on-month non-food inflation printed at 3.6%, an improvement over rates recorded over the preceding three months. The key drivers of non-food inflation were Transport at 41.6%, Household equipment & maintenance at 39.6%, and Housing, water, electricity & gas at 38.4%.

Across the regions, the inflation rate ranged between 21.0% in the Upper East region and 35.8% in the Eastern region. Inflation on local and imported items rose from 27.3% and 28.2% printed in May to 29.2% and 31.3% in June respectively.

July’s Monetary Policy Committee meeting to be held later in the month is likely to see another policy rate hike in a bid to curb the stubbornly high inflation rate. It is however expected that the committee will hand down a modest rate hike as the domestic economy remains fragile at a time when labour agitation has escalated.