Consumer inflation further increased to 33.9 percent in August 2022 – signalling a reversal in the cool-off of inflation momentum and a 15th consecutive monthly increase.
The rise represents a 2.2 percentage point surge from the 31.7 percent recorded in the previous month, July 2022.
This may signal a reversal in the cool-off in build-up of inflation as seen up until July 2022; ending a 3rd straight month decline in the pace of inflation from a 2.2 percentage point increase to 1.9 percentage points during the period under review.
Per Ghana Statistical Services (GSS), the consumer price index (CPI) that measures changes in the price of a fixed basket of goods and services purchased by households increased on the back of continuous rises in transportation costs which result from escalating ex-pump prices; as well as housing, water electricity, gas and other fuels.
“Wide disparity is observed across the 13 divisions, with Y-o-Y housing, water electricity, gas and other fuels leading by 46.7 percent; closely followed by transport 45.7 percent and education service (7.2 percent); and insurance and financial services (5.4 percent) recording the lowest,” the Government Statistician, Samuel Kobina Annim, said at the release of August 2022 inflation data.
He further highlighted that bread recorded the highest increment in price among the top-10 items with highest inflation rates.
“Among the top-10 items with the highest weight, bread recorded the highest inflation of 64.8 percent followed by herrings at 56.2 percent,” he said.
The August 2022 data further place inflation about 3.4x over the Bank of Ghana’s upper policy target of 10 percent, and substantially well outside the long-maintained medium-term policy bracket.
Last month, in response to the continuous rise in inflation, the monetary policy committee (MPC) of the Bank of Ghana held an emergency meeting in August 2022 to increase the policy rate by an unparalleled 300 basis points (bps) to 22 percent.
The markets have expressed the view that persistent surges in inflation despite aggressive policy rate hikes by the central bank are indicative of a harsher, multifaceted inflationary environment.
In the May 2022 MPC report, the central bank projected the inflation rate to remain elevated above target until the second quarter of 2024. However, inflation is expected to peak at about 34 percent before end of the year.
Good harvest could tame rising inflation
Amid improved rainfall this year, which has been better than the previous year, market watcher Databank anticipates that a better food harvest season could tame the rise in food inflation from late Q3 to Q4.
Food inflation’s contribution to total inflation has declined further, below the 51 percent level.
However, the investment firm noted that apart from the adverse effect of fertiliser shortage there is much expectation for a better food harvest this year.
“This could tame the rise in food inflation with a downward pressure on headline inflation when combined with continued tightness in the monetary policy stance,” the asset management company said.
In addition to the global shocks to fertiliser costs and food supply chains, Databank observed that this year’s food inflation trend partly reflects the lagged impact of the disappointing harvest from last year.