Inflation in 2023; Light at the End of the Tunnel?

In line with recent global trends, the year-on-year (y-o-y) inflation rate recorded its first decline after months of increases fueled by a troubled Cedi, hikes in the prices of consumer goods, utility, and transport fares among others. The inflation rate (y-o-y) kickstarted the year at 53.6%, recording a marginal decline of 50 basis points (bps) from 54.1% recorded in December 2022, its first decline in nearly two years, after the inflation rate assumed a steady rise in June 2021.

The month-on-month (m-o-m) inflation rate grew at the slowest pace since December 2021 at 1.7%, having declined from 3.8% at last year’s close. The slowdown in the consumer price index came on the heels of improving consumer sentiments as the prices of petroleum products and transport remain relatively stable albeit amid a troubling Cedi outlook. Although there seems to be calm being restored in the consumer prices arena, it is expected that prices will remain upward pressured following the upward adjustment in utility prices and VAT among others.

Food inflation (y-o-y) was up by 130 bps from 59.7% in December 2022 to begin the current year at 61.0%. Month-on-month food inflation slowed down from 4.1% in December last year to 2.8%, its lowest since September 2022. Food inflation (y-o-) was led by Fruit & vegetables at 88.3% and Milk & dairy products at 85.6%, with soft drinks and oils & fats as the biggest price driver of food inflation in December with m-o-m increases of 4.2% and 4.1% respectively.

The reduction in the fuel cost helped push down the inflation rate (y-o-y) on non-food items for the first time in more than a year to 47.9%, its lowest since November 2022 from December’s print of 49.9%. This was largely influenced by disinflation recorded in the Transport and Education divisions which recorded inflation rates (m-o-m) of -0.6% and -0.5% respectively.

Across the regions, the inflation rate hovered between 34.7% in the Volta region and 66.2% in the Eastern region. Whilst the inflation rate (y-o-y) on local goods dipped from 51.1% in December to 50.0% in January, that on imported goods jumped from 61.9% to 62.5% to further widen the gap between inflation on local and imported goods.

The first monetary policy committee sitting for the year saw the central bank hand down another rate hike from 27.0% to 28.0% on the back of the need to take a tougher stance against red-hot inflation numbers following the prevalence of risks to the inflation outlook.