Following revision to the reference period for the Consumer Price Index (CPI) to 2018, the consumer inflation has slowed to 7.8 percent in August 2019, year-on-year.
This comes ahead of the announcement to be made by the Monetary Policy Committee (MPC) of the Bank of Ghana on the monetary policy rate.
According to the Ghana Statistical Service (GSS), the changes of price levels for the month was largely driven by the alcoholic beverages, tobacco and narcotic 12.9 percent.
The CPI measures the change over time in the general price level of goods and services that households acquire for the purpose of consumption.
Some market analysts opine that, the drop of the key indicator is likely to have an impact on the government treasury market, where it is expected that yields on the short-end of the yield curve to drop in coming weeks.
For this week, yields recorded increases, as the 91-Day and 182-Day inched-up by 2 basis points (bps) to 14.70 percent and 15.14 percent respectively from 14.68 percent and 15.12 percent last week.
The current position of inflation could boost the confidence of the central bank’s MPC to ease the monetary policy rate.
Ghana’s benchmark policy rate is currently at 16.0 percent.
The non-food group recorded a year-on-year inflation rate of 7.4 percent in August 2019.
This was largely driven by alcoholic beverages, tobacco and narcotics sub-group at 12.9 percent, as well as transport at 10.2 percent and housing, water, electricity, gas and other fuels 9.9 percent.
The Food and non-alcoholic beverages group recorded a year-on-year inflation rate of 8.2 percent. Fruits and nuts of 25.2 percent, cereals and cereal products of 10.6 percent, sugar, confectionery and deserts of 9.0 percent, and Ready-made food and other food products 8.3 percent were the major drivers of the food inflation.
At the regional level, the year-on-year inflation rate ranged from 3.9 percent for Eastern region to 12.4 percent for Greater Accra region. Four regions (Greater Accra, Upper West, Central and Volta) recorded inflation rates above the national average 7.8 percent. Eastern region recorded the least inflation rate of 3.9 percent.
Revision of Reference Period
The new reference period of 2018 has an expanded basket over the previous one which had 2012 as the reference period. This adequately reflects the peoples’ purchasing habit. There are 307 items in the new basket compared with the 267 in the old basket. The points of data collection have also increased from 42 markets in the old basket to 44 markets in this new series. The new series has taken into account changes in consumption pattern over time.