Inflation Rate at 23.6% Puts Focus on Ghana’s Central Bank

Headline inflation, stoked by higher costs of imported goods such as cooking oil and gasoline due to the war in Ukraine and Indonesia’s ban on palm oil exports, is now more than twice the top of the central bank’s target band of 6% to 10% and has been above the range for eight months. For the first time in 29 months imported items surpassed locally produced items, Annim said.

Food-price growth surged to 26.6% year-on-year from 22.4% in March and non-food inflation accelerated to 21.3% in April from 17% the previous month. Prices jumped 5.8% in the month. 

“The monetary policy committee of the central bank will have a nail-biting decision to make,” Courage Martey, an economist with Accra based Databank Group, said by phone ahead of the release.  

While inflation is high it is also straining economic growth together with slowing global output and a 2.5 percentage point increase in March in the key interest rate, the biggest hike since at least 2002. The S&P Global Ghana Purchasing Managers’ Index has been below 50 since February, indicating a deterioration in business conditions. 

“Any attempt by the central bank to tighten monetary policy further will be an attempt to squeeze water out of stone,” Martey said. “Inflation hasn’t peaked yet, so the MPC would want to avoid creating a perception of chasing inflation when it should be ahead of the inflation curve.”

Ghana’s MPC is scheduled to announce its next rate decision on May 23.

Source: Bloomberg Business News