By Elorm Desewu
With the recent hike in petroleum prices in the country, year on year inflation is expected to rise further in the coming month as it would have a severe impact on both food and non food inflation of the Consumer Price Index, (CPI) basket.
The March fuel price increase will have a severe impact on spending patterns, even on food, as consumers spend less and move to cheaper alternatives.
The country may experience an upward trend in the consumer price index (CPI) and food inflation in the short term. The fuel price remains the main driver of higher costs going forward.
The latest forecast by the Bank of Ghana shows that inflation would likely remain above target in the near-term, driven by both external and domestic factors, and only return to target band in about four-quarters ahead. The key risks to the inflation outlook include: rising crude oil prices and its transmission to ex-pump petroleum prices and transportation costs, rising global inflation, food price uncertainties, and the fiscal outlook.
The Monetary Policy Committee maintained the policy rate at 14.5 percent in an attempt to stem the rising inflation.
Ghana’s inflation rate for the first month of the year – January has reached 13.9 percent, according to figures released by the Ghana Statistical Service, which is the highest in six years..
The increase was attributed to rising prices in utilities namely (water, electricity) and transportation while the contribution of housing, water, electricity and gas to overall inflation increased by 4.6 percentage points from 17.5% recorded in December 2021 to 22.1% in January 2022.
Month-on-month between December 2021 and January 2022 inflation was 2.1%. For the first time in seven months, non-food inflation exceeded food inflation (14.1% versus 13.7% respectively).”
On the month-on-month basis, non-food inflation also exceeded food inflation this month (January 2022) by 0.2 percentage points (2.2% vs. 2.0%). Housing and Transport (which includes fuel) once again were the two divisions that recorded the highest inflation (28.7% and 17.4% respectively).
On the regional front, Greater Accra has regained its lead in overall inflation with Upper West region recording the highest food inflation.
Meanwhile, the latest development in Ghana’s inflation is likely to pressure the Bank of Ghana to review its policy rate upwards in the coming month.
