Inflation Records its Second Decline in 2023

The year-on-year inflation rate eased for the second time in succession to support moves by the government to drive down the general level of interest rates in the Ghanaian economy. The annual inflation rate fell to its lowest since November 2022 to print at 52.8% in February, having declined from 53.6% last month. The observed decline in consumer prices comes on the back of easing price pressures on consumer goods and services as the Cedi begins to witness some stability coupled with the slowdown in the prices of fuel.

Month-on-month inflation, however, after touching its lowest in fourteen weeks in January, rose marginally to print at 1.9% in February, up from 1.7% in the previous month. Recent global trends seem to suggest that red-hot inflation numbers have reached their peak with Ghana having experienced its own at the close of last year. As inflation takes a downward trajectory, expectations of slowing down consumer prices are expected to further drive down future interest rates in line with efforts by the government to consolidate the yield curve.

Food inflation came in as a significant driver of the national inflation figure as a drop in the month-on-month inflation figure from 2.8% in January to 2.0% in February contributed to the dip in the year-on-year national inflation rate. Accordingly, the year-on-year food inflation rate fell by 190 basis points (bps) from 61.0% in January to print at 59.1% in February.

The inflation rate on the non-food and alcoholic beverages group stalled at 47.9% (y-o-y) in February, although the month-on-month inflation figure of this group saw a 90 bps increase from 0.8% in January to 1.7% in February. Price pressures persisted on sub-group items such as Transport at 70.3% (y-o-y) and Information & Communication at 2.6% (m-o-m) inflation rates.

Across the regions, the inflation rate ranged from 35.4% in the Volta region to 60.1% in the Greater Accra region. Inflation on local and imported goods both recorded decreases with the inflation rate edging down by 100 bps and 20 bps to print at 49.0% and 62.3% respectively.

The recent dips in the inflation rate are expected to set the tone for the first policy ease since May 2021 when the central bank took a hard stance against inflation. Some analysts, however, believe the bank should rather adopt a wait-and-see approach as some global central banks are expected to keep hiking rates.