May inflation inches up to 9.8%

The general price levels of goods and services, otherwise known as the Consumer Price Index, for May 2018 has increased slightly from 9.6 percent recorded in April to 9.8 percent, the Ghana Statistical Service (GSS) data has shown.

Commenting on the increment, Acting Government Statistician, Baah Wadieh, said both the food and non-food baskets inflation rates are accountable for the marginal rise.

“We observed that both food and non-food inflation rates went up. So it is the inching up both food and non-food inflation that basically accounted for the average rise in the inflation for May. We then tried to find out what caused this and we saw it was attributable more to base drift effect.

The general observation is that if we compare the price levels of May 2017 and May 2018, the base influence was lower and that actually affected the rate for this year,” he said at the release of the data in Accra.

The non-food group recorded a year-on-year inflation rate of 10.9 percent in May compared to 10.6 percent recorded in April.

Four subgroups—clothing and footwear, recreation and culture, furnishings, household equipment, and miscellaneous goods and services—all recorded rates above the average 10.9 rate in this basket. Housing, water, electricity, and gas recorded the lowest in this subgroup—3.9 percent.

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In the food and non-alcoholic beverages basket, the inflation rate was 7.6 percent, a 0.2 percentage point higher than the 7.4 recorded the previous month. Seven subgroups in this basket also recorded rates higher than the average rate.

They are coffee, tea and cocoa, fruits, food products, mineral water and soft drinks, meat and meat products, vegetables, oils and sea food. Milk, however, recorded the least rate of 6.1 percent

Inflation for imported items also recorded 12.4 percentage, 3.7 percentage points higher than that of locally produced items of 8.7 percent.

At the regional level, the year-on-year inflation rate ranged from 8.4 percent in Upper East region to 12 percent in the Upper West region.

Five regions—Upper West, Brong Ahafo, Western, Northern and Ashanti all recorded rates above the national average of 9.8 percent. Upper East recorded the lowest rate of 8.4 percent in April 2018.

Effect on policy rate

The Bank of Ghana last month, decreased the policy rate, for the sixth time, by 100 basis points to 17 percent, following drop in inflation to 9.6 percent in April. The bank cited favourable inflation conditions as the main reason for the decision.

“Both headline and core inflation have broadly trended downward, indicating easing underlying inflation pressures.  Additionally, weighted inflation expectations across the sectors have continued to decline. Headline inflation trended within the medium-term target of 8±2 percent and the forecast points to sustained disinflation over the horizon, barring unanticipated shocks.

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“Under the circumstances, the Committee noted that the risks to the inflation outlook are subdued in the forecast horizon. While global and domestic developments do not yet pose a threat to inflation in the near-term, recent changes in global financing conditions and its impact on emerging market asset classes require some vigilance.

“Consequently, the Committee decided to reduce the monetary policy rate by 100 basis points to 17 percent. The Committee, however, stands ready to take the appropriate policy measures to address any potential threats to the disinflation path,” the Governor announced.

However, with inflation inching up slightly in May, it is unclear if the Bank of Ghana will continue to reduce the policy rate or maintain it to play safe.

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