Government misses 2018 inflation target

Government’s end of year Consumer Price Inflation (CPI) target of 8.9 percent for 2018 was missed narrowly, as the CPI hit 9.4 percent as at December 31, 2018.

Compared to the same period last year, the inflation rate was 11.8 percent. The December rate of 9.4 percent is 0.1 percentage point higher than that which was recorded in the previous month— November 2018.

According to Acting Government Statistician, David Kombat, the marginal rise between the two months can be attributed to both food and non-food groups experiencing an increment in their price levels.

“We can see that with the non-food group inflation rate rose by 0.1 percentage points—from 9.7 percent in November to 9.8 percent. And for the food group, it rose from 8.6 percent in November 2018 to 8.7 percent in December. These were mainly responsible for the slight increase we are seeing,” he said.

In the non-food group, five subgroups recorded year-on-year inflation rates higher than the group’s average rate of 9.8 percent. These are transport which recorded a rate of 13.6 percent; followed by clothing and footwear with 13 percent; furnishings, household equipment and routine maintenance with 11.6 percent; and miscellaneous goods and services with 10 percent.

Four subgroups in the food group also recorded rates higher than the group’s average. These are coffee, tea and cocoa at 13.5 percent; fruits 11.4 percent; meat and meat products 10.9 percent; and mineral water, soft drinks etc. at 9.2 percent.

At the regional level, year-on-year inflation rate ranged from 7.5 percent in Upper East Region to 11.4 percent in Upper West Region. Five regions had rates above the national average. They are Upper West 11.4 percent; Brong Ahafo 10.3 percent; Western 10 percent; Ashanti 9.7 percent; and Northern 9.5 percent.

Inflation for imported items was also up 11.1 percent, which is 2.4 percentage points higher than that of locally produced items at 8.7 percent.

Meanwhile, government in the 2019 budget, has set an end of year inflation target of 8 percent. If measures are put in place by managers of the economy to ensure that this target is achieved, it will come as a boost to the business community as the Bank of Ghana will have the space to further reduce the policy rate, thereby moving banks to reduce their interest rates and encourage the private sector to access loans to inject in their business as capital.

The Monetary Policy Committee (MPC) of the central bank had to keep the policy rate at 17 percent in the last meeting in November 2018, citing inflation-risk as the main reason.

“Latest inflation forecasts show a continued disinflation path, but risks remain – especially from the external environment, which may impact adversely through the trade and financial channels. Given these considerations and weighing the balance of risks, the Committee decided to keep the policy rate unchanged at 17 percent while closely monitoring developments, especially in the global economy,” Governor of the central bank, Dr. Ernest Addison said.