Inflation to stay Policy rate…as April inflation hits 9.5percent

The general increase in price levels of goods and services, otherwise known as inflation, has inched up again in April, the third consecutive time inflation has seen an upward movement his year.

According to data released by the Ghana Statistical Service (GSS), inflation increased by 0.2 percentage points to 9.5 percent in April – largely driven by the non-food basket.

The main price-drivers, according to the GSS, were clothing and footwear; recreation and culture; transport; furnishing and household equipment.

The development presents a challenge to the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) on what decision to make on the policy rate later this month, bearing in mind government’s expansionary policies this year.

In March this year, when the MPC was faced with a similar decision when inflation rose to 9.2 percent in February from 9 percent recorded the previous month, the policy rate was maintained as expected. The MPC said it arrived at the decision due to risk in inflation outlook.

“The Committee was broadly of the view that the pace of disinflation has slowed somewhat, with inflation hovering within the 9.0-9.5 percent range. While headline inflation remains within the medium-term target band, the latest forecast shows some upside risks in the outlook. Though the earlier exchange rate pressures have receded, the full pass-through of the recent depreciation to inflation remains to be assessed.

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“The Committee was of the view that the current stance of monetary policy is relatively tight, and real interest rates in Ghana were comparatively high. Under the circumstances, the Monetary Policy Committee decided to keep the policy rate unchanged at 16 percent,” the MPC said at the time.

With the same risk in the outlook of inflation resurfacing in April – and with policy think-tanks such as the Economic Intelligence Unit (EIU) predicting inflation to end the year with 11 percent – it is highly expected that a similar decision to the one taken in March will be taken by the MPC come May 27.

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