Inflation Worsen Further to a 21-Year High

Inflation in August worsened to a more than 20-year high as ongoing monetary policies adopted by the central bank fails to tame stubbornly high inflation numbers. The inflation rate rose from 31.7% in July to print at 33.9% in August following the persistent and sustained upward price pressures on consumer goods and services. Ghana’s central bank in an attempt to bring the sharp rise in consumer prices under control has adopted a number of measures including a 750 basis point hike in the policy rate over the past eight months and an upward review of the cash reserve ratio from 10% to 12%.  The Central bank has also announced further increases in the cash reserve ratio from 12% to 15%, climbing up by 1% every month from September to November.

These measures among others have had minimal impact on consumer prices as some key underlying risks to inflation hinge on external developments. A release from the Ghana Statistical Service showed that inflation on imported items subdued that on local items for the fifth consecutive time, underscoring the impact of a pressured Cedi on consumer goods. The data revealed that four of the top five inflation items led by Grapes at 178.1% were imported items.

Food inflation touched its lowest month-on-month inflation in 2022 at 1.8% in August, down from 3.3% recorded in July. Yearly food inflation printed at 34.4% in August, up from 32.3% in July. Eight out of the fifteen subgroup items in the food inflation basket including Oils & Fats at 74.0% and Fruits & Nuts at 49.4% recorded rates higher than the group’s average inflation.

Inflationary pressures on the non-food and alcoholic beverages category cooled off for the fourth consecutive time as month-on-month inflation fell to 2.0% in August, down from 3.0% in July. Yearly non-food inflation rose from 31.3% in July to 33.6% in August as Housing & utilities drove the biggest month-on-month increases with a monthly increase of 3.6%.

Across the regions, inflation ranged from 22.8% in the Upper East region and 41.0% in the Eastern region. Inflation on local and imported items recorded their eighth consecutive increase in 2022, rising from 30.9% and 33.9% in July to 33.4% and 35.2% in August respectively.

The Monetary Policy Committee took a hard stance against inflation, announcing a historic 300 basis point hike in the policy rate at an emergency committee meeting held in August. It is expected that the committee will hand down another hike as it meets later in September.