Consumer inflation has inched further upward for a fifth consecutive month, recording 12.2 percent in November 2021 and thereby taking the rate beyond initial stages of the pandemic when prices soared.
The increase, though anticipated by the market – given both global and local factors, is the highest in the last 14-months when the indicator stood at 11.4 percent in July 2020. This far exceeds the central bank’s medium-term target band of 8 ±2 percent.
Data released by the Ghana Statistical Service (GSS) show that following a slowdown in inflation to 7.5 percent in May 2021 from 10.3 percent February 2021, there has been a consistent rise in consumer inflation to the current level – largely on the back of increasing food and non-alcoholic beverages inflation.
Painting a picture of the likely impact from the latest inflation data, Senior Economist with Databank, Courage Kingsley Martey, described this development as disappointing – but touched on the fact that the situation is not unique to Ghana’s economy, as inflation seems to be a global concern largely driven by energy prices, food prices and supply side bottlenecks.
“It is such an anti-climax to 2021. This underscores the fact the year is ending on a rather disappointing note for most of our macroeconomic indicators, with the policy implications well cut-out for 2022,” Mr. Martey said.
However, he added: “We should view this development within the global context, as Ghana’s economy seems to be experiencing its fair share of global price shocks – especially given high public expenditure with low productivity across the economy”.
The financial analyst called for a more decisive policy response by the BoG, especially as advanced economies are signalling a faster pace of policy normalisation in 2022.
“Admittedly, the growth in Ghana’s monetary aggregates has slowed down significantly; which is good for controlling price pressures from the demand side. But we may have to do a bit more in 2022 with the interest rate tools,” he said.
“At 14.5 percent, the policy rate is just consistent with what the Bank of Ghana felt was needed to support the economy through the pandemic in 2020. So, the November 2021 increase did not precisely signal a tighter monetary regime. Hence, the continued rise in inflation raises the scope for further monetary policy tightening in 2022,” he said
During the first half of 2021, the economy recorded a general decline in CPI inflation to a low of 7.5 percent in May 2021 – prompting the Bank of Ghana to further reduce the policy rate to 13.5 percent in May 2021. Since then, the inflation curve has rotated upward with steep climb to the current level of 12.2 percent. In the process, the central bank had to reverse the 100 basis points (bps) cut of May by pushing the policy rate back up to 14.5 percent.