Editorial: Disinflation trend continues, marginally


Market analysts rightly predicted a rise in the rate of inflation for June 2023, as consumer inflation again rose to 42.50 percent in June 2023 from 42.2 percent the previous month.

The Ghana Statistical Service (GSS) attributes the rise to renewed price risks stemming from implementation of revenue and utility tariff measures in May of this year.

It was driven primarily driven by food inflation which accounted for 54.2 percent of the headline inflation figure, further increasing from 51.8 percent in May. The marginal increase marks the second consecutive month of a disinflation trend observed earlier this year.

Indeed, market analysts anticipate that the combined impact of the revenue measures and rising food prices will push headline inflation higher in June and possibly July.

The latest inflation data for June provides further insights into pricing trends and will guide future policy decisions by the Monetary Policy Committee of the Bank of Ghana, amid concerns that the minutes of the Federal Open Market Committee (FOMC) in the US indicated a bias for further tightening – depending on the economy’s evolution.

Inflation showed signs of easing in the first half of 2023, dropping from a peak of 54.1 percent in December 2022 to 41.2 percent in April 2023. However, in May it increased by 100 basis points, reversing the downward trend.

Fiscal authorities aim to control rising financing costs to meet IMF programme conditionalities, while monetary authorities cannot guide interest rates down due to high inflation and recent price developments in the real economy.

Government Statistician, Professor Samuel Kobina Annim, advised policymakers to take a critical look at factors contributing to the increase of food inflation. He pointed out that food inflation has consistently seen an increase of about 20 percentage points compared to non-food inflation.

Prof. Annim announced that food inflation is at 54.2 percent higher than the national average, with imported products increasing by 43.8 percent while locally produced items saw a rate 36.2 percent.

Meanwhile, Ghana overtook Egypt with the highest interest rates among 15 top African countries. Average lending rates hover around 38% and rank Ghana among the highest on the African continent.

At this stage, it is unclear whether the Bank of Ghana will increase its Monetary Policy Rate from the current 29.5% to help mop-up excess liquidity in circulation and rein-in inflation.

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