Inflation Inches Further Down into the Third Quarter

Inflation continued its downward trend into the start of the third quarter of the year as the rate of inflation recorded its fourth consecutive dip in July despite concerns about the prevalence of the underlying risks to the inflation outlook on the heels of a struggling Cedi. The persistent drop in the inflation reading over the past few months is consistent with the government’s 2024 year-end inflation target of 15.0%.

The latest inflation print revealed that the inflation rate edged down to its lowest in more than two years at 20.9% in July from a 2024-year high of 25.8% in March. Month-on-month inflation cooled off in July at 2.1%, the lowest in three months, having slowed down from 2.9% in June. The drop in the inflation reading has been supported by the easing price pressures on food stuff amidst a slowdown in the prices of petroleum products and a moderate currency depreciation.

Overall food inflation saw a sharp decline from 24.0% in June to print at 21.5% in July, its lowest since February 2022. Month-on-month food inflation recorded a drastic fall from 5.1% in June to print at 1.7% in July with four subgroup items recording disinflation numbers. Oils & fats at -5.7% and Fruits & nuts at -2.5% led the sharp fall in the monthly inflation reading.

Non-food inflation recorded a marginal dip from 21.6% in June to 20.5% in the yearly reading with four out of the twelve sub-group items recording numbers higher than the group’s average inflation rate. Insurance & financial services came in with the biggest increase as it rose from 6.2% in June to 11.3% in July, followed by Housing & utilities which also rose from 26.0% to 28.6% over the same period. Month-on-month inflation reading for the non-food category revealed a sharp increase from 0.9% in June to 2.4% in July.

Across the regions, the inflation rate hovered between 10.6% in the North East region and 26.9% in the Upper East region. Inflation on local items resumed its downward trend in July to print at 23.3% after recording a marginal increase to print at 25.0% in June. That on imported items maintained its downward trend as it fell to 15.6% in July from 17.5% in June.

The last sitting of the Monetary Policy Committee of the central bank saw the committee glued to its wait-and-see stance as it cautiously handed down its third monetary policy stay with the central bank warning of the need to maintain a strong monetary policy stance supported by strong fiscal consolidation efforts which have to include remaining vigilant to ensure that the end-year inflation objectives are realized.