Ghana’s April inflation drops to 11.66%

Ghana’ Headline inflation rate fell for the tenth consecutive month to its lowest level in almost two years in April, making way for further interest rate cuts.
The rate of inflation for April stood at 11.66 percent, representing a further decline of 1.41 percentage points from the March figure of 13.32 percent.

The continuous drop reflects the effects of government’s relatively tight fiscal and monetary policies and stability of the cedi against major trading partners in the past quarter.
Likewise, petroleum prices over the last six months remained unchanged, therefore avoiding any price increases of goods and services due to the sensitive commodity.

The decrease was mainly driven by the non-food group which constitutes 55.09 percent of the consumer price index (CPI).

The items in the non-food basket such as recreation and culture (34.64%), hotels, cafes and restaurants (19.71%), transport (18.44%), and furnishings, household equipment and routine (18.36%) were the main drivers of the current inflationary. Ginger and spices (38.07 %), sugar, jam, honey, syrup, and confectionary (34.92%) were the highest contributors in the food group.

The current fall puts inflation at its lowest level since December 2007 and leaves the West African frontier economy in line to reach single digit well before the central bank's end-of-year target. The government’s end of period target is 9.2%.

Director of Economics and Industrial Statistics, Ghana Statistical Service (GSS), Ebo Duncan at a media briefing in Accra said government’s wage bill for the year would be the main determining factor for future inflation.

"We're expecting significant increase in the wage bill if the single spine salary scheme is implemented in July, as planned" he said, referring to a revamped public sector pay structure.
"If this happens the propensity to spend will increase and this is likely to directly and indirectly affect inflation." he noted in addition.

Encouraged by falling inflation rates, the Central Bank has cut prime interest rates twice in a row since November, in what analysts said is a clear shift towards focusing on growth. The most recent cut in April was by a larger-than-expected 100 basis points to 15.0 percent.

The outlook, as assessed by the Bank of Ghana (BoG), points to lowering inflationary risks - an indication that the real value of money will continue to rise, and banks would become more willing to reduce lending rates.

The rate of inflation, which stood at 18 percent in October 2009, declined to 16.9 percent in November and then to 15.9 percent in December 2009.