Inflation Rate Opens the Third Quarter at 10.1%

The rate of inflation remained on course to touch pre-COVID levels after it began the third quarter dropping to its lowest point since March, 2020. October’s inflation rate eased further downwards to 10.1% from 10.4% in September, its second consecutive decline after it dropped marginally from 10.5% in August. Year-on-year, the inflation rate was up by 240 basis points (bps) from 7.7% recorded over the same period last year.

The consumer price index is gradually inching towards the Bank of Ghana’s (BoG) medium-term inflation target band of 10.0% ± 2.0% after a surprise shock to the inflation outlook in April followed the imposition of lockdown restrictions. Data released by the Ghana Statistical Service (GSS) showed that food and non-alcoholic beverages persisted as the predominant driver of year-on-year inflation after it contributed 54.7% to the total inflation in October, up from 47.6% in September.

The rate of inflation for Food and non-alcoholic beverages group after four months of consecutive declines, rose by 140 bps to 12.6% in October from 11.2% the previous month after ‘Vegetables, tubers, & plantains’ posted a significant month-on-month increase from 18.9% to 24.9%. The GSS explained that the sharp rise in the vegetables sub-class came on the back of the relatively low index for vegetables back in October, 2019.

The non-food and alcoholic beverages category recorded an average inflation rate of 8.3% in October, down from 9.8% in September. This came following a significant drop in the inflation figure for transport which fell from 10.1% last month to 5.3% in October. ‘Housing, water, electricity & gas’ at 20.3% was the only subgroup item with a rate higher than the group’s average rate. ‘Insurance and financial services’ at 2.1% was among ten others that recorded rates below the group’s inflation figure.

Across the regions, the Greater Accra recorded the highest inflation with a rate of 15.2% while the Upper West recorded the lowest at a rate of 1.6%. Inflation on locally produced goods eased marginally to 12.2% from 12.3% in September whilst that on imported goods stayed at 5.1%.

As the Monetary Policy Committee of the BoG meets later in the month to review the performance of the economy and accordingly announce its last policy rate for the year, it is expected that widening fiscal gap, election related uncertainties, and the impact of the coronavirus on the local economy will take a center stage in influencing the direction of the policy rate.