Inflation Falls to a 25-Month Low in May

Inflation fell for the second consecutive time in May from a 2024 year high of 25.8% in March on the back of a significant decline in the annual inflation reading on imported items with the free fall of the Cedi having a minimal impact on the overall inflation reading. The drop in the latest inflation print was also supported by a plunge in the reading for food items which fell to its lowest in more than fifteen months.

Data released by the Ghana Statistical Service revealed that the year-on-year inflation rate fell to its lowest since March 2022 at 23.1%, having eased from 25.0% in the previous month. The month-on-month inflation reading, however, rose for the second consecutive time to print at 3.2% in May from a 2024-year low of 0.8% in March, giving an indication of the persistence of inflationary pressures on consumer goods and services.

Food inflation in May recorded a 420 basis points (bps) drop from 26.8% in April to print at 22.6% as fourteen out of the observed fifteen sub-items recorded a reduction in their inflation numbers. Key decliners included Tea & plant products and water which fell from 59.3% and 8.9% in April to 34.3% and 6.3% in May respectively. The month-on-month inflation reading on food items soared to 2.7% in May from 2.1% in April with Vegetables and Fruits & nuts coming in with the highest prints.

The inflation rate on non-food items and alcoholic drinks rose marginally to 23.6% in May from 23.5% in April as a significant increase in transport costs in the period under review reversed declines recorded by ten other sub-group items. The month-on-month inflation figure on the non-food inflation basket came in at 3.6% in May, a sharp rise from 1.5% recorded in April with Transport at 10.6% and Education service at 5.5% recording the highest inflation numbers.

Across the regions, the inflation rate hovered between 10.3% in the Oti region to 35.6% in the Upper East region. Inflation on local and imported items recorded their second consecutive decrease to 24.7% and 19.6% in May from 25.7% and 23.5% in April.

The last monetary policy committee sitting saw the central bank stay on a cautious stance after its assessment of the inflation outlook revealed the prevalence of upward pressures on consumer prices. Accordingly, the committee stalled the prime rate its current 29.0% level.