Consumer inflation drops ahead of MPC meeting

For a second consecutive month, Ghana’s consumer inflation has declined further to 9.1 percent in June 2019, following a decline to 9.4 percent in May 2019, year-on-year (y-o-y).

The consumer inflation reached its lowest rate since January’s 9.0 percent.

The Consumer Price Index (CPI) measures the change over time in the general price level of goods and services that households acquire for the purpose of consumption.

According to the Ghana Statistical Service (GSS), several factors contributed to the fall in the rate of inflation in the month. The major ones include exchange rate stability, favorable weather patterns and conditions, government policy on planting for food and jobs, as well as the start of the harvest season, among others.

Some market analysts are of the view that, this 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 will drop further next week.

For this week, yields recorded a drop, as the 91-Day and 182-Day treasury bills declined by 2 basis points (bps) and 3bps  to 14.72 percent and 15.17 percent respectively from 14.74 percent and 15.20 percent last week.

The recent downward trend in inflation could boost the confidence of the central bank’s Monetary Policy Committee (MPC) to ease monetary policy at the next meeting. The MPC is expected to meet next week to review recent developments in the economy to help them position the benchmark policy rate for the next two months. Ghana’s benchmark policy rate is currently at 16.0%, where it has been since a 100 bps cut in January and the MPC now has the option to cut it further to make credit cheaper, which could increase private sector demand for credit to expand production and enhance overall economic activity.

Food and non-food inflation for June 2019

The Food and non-alcoholic beverages group recorded a year-on-year inflation rate of 6.5 percent. This is 0.2 percentage points lower than the 6.7 percent recorded in May 2019.

Five subgroups of the food and non-alcoholic beverages group recorded inflation rates higher than the group’s average rate of 6.5 percent. The subgroups were Coffee, tea and cocoa (18.0 percent), Fruits (10.7 percent), Vegetables (8.2 percent), Mineral water, soft drinks, fruit and vegetable juices (7.2 percent) and Meat and meat products (8.1 percent).

Non-food group

The non-food group recorded a year-on-year inflation rate of 10.3 percent in June 2019, compared to 10.6 percent recorded for May 2019.

Four subgroups of the non-food group recorded year-on-year inflation rates higher than the group’s average rate of 10.3 percent.

These were clothing and footwear 15.2 percent, recreation and culture 15.0 percent, furnishing, household equipment and routine maintenance 14.6 percent and miscellaneous goods and services 11.3 percent. Inflation was lowest in the Education subsector at 6.2 percent.

Regional differentials

 At the regional level, the year-on-year inflation rate ranged from 8.3 percent in the Upper East Region to 11.1 percent in Upper West region.

Five regions, Upper West, Brong Ahafo, Volta, Western and Ashanti, recorded inflation rates above the national average rate of 9.1 percent. Volta and Ashanti region recorded the same inflation rate of 9.3 percent.