Inflation Rate Surpasses Target to End 2022 at 54.1%

The rate of inflation soared to surpass the government’s revised end-period headline inflation target of 28.5% as the prices of consumer goods and services continued its upward trajectory. The year-on-year inflation figure rose to a record 54.1%, its highest in more than twenty-five years, up from 50.3% printed in November. This compares with an inflation reading of 12.6% recorded over the same period in 2021, representing a 4150 basis points (bps) increase in the annual inflation figure.

Month-on-month inflation rate grew at a slower pace at 3.8% in December compared to 8.6% posted in November. The sharp and sustained rise in the prices of consumer goods slowed down in December following the Cedi’s rally against some of its major trading partner currencies, recovering over 50% of its lost value, coupled with a significant reduction in the prices of petroleum products. These developments forced a reduction in the prices of some goods and services including transport fares.

Food inflation went up by 440 bps from 55.3% in November to print at 59.7% in December as it averaged 33.7% in 2022. Month-on-month food inflation inched up to print at 4.1% in December compared to November’s 10.4% reading. Food inflation was led by Water and Fruit & vegetable juices at annual inflation rates of 94.2% and 84.6% respectively.

Annual non-food inflation came in at 49.9% in December, up from 46.5% in November to average 29.8% in the twelve months to December. Month-on-month non-food inflation ended the year at 3.6% after slowing down from 7.2% in November. The biggest price drivers of non-food inflation were Transport and Furnishings & household equipment with month-on-month inflation rates of 6.7% and 5.0% respectively.

Across the regions, the inflation rate ranged between 35.6% in the Volta region and 66.7% in the Greater Accra region. The margin between inflation rates on local and imported items widened further for the third consecutive time with the inflation rate on imported items ending the year at 61.9% compared to that on local items at 51.1%.

The Monetary Policy Committee closed the year sending the policy rate to 27.0% after delivering a 250 bps hike in a bid to tame stubbornly high inflation numbers. The committee will be expected to act cautiously going into 2023 as continuous hikes may have dire consequences on the domestic economy at a time when the country is embarking on a debt restructuring program.