Cedi depreciation, high inflation temporary – 2nd Dep. Governor

Second Deputy Governor of the Bank of Ghana (BoG), Elsie Addo Awadzi, has described as ‘temporary’ the continuous depreciation of the cedi and upward trend of the country’s headline inflation.

According to her, speculative behaviour by Ghanaians is working against attaining stability in the depreciation of the cedi and inflation.

“The current high inflation and cedi depreciation are temporary, and we must avoid speculative behaviour that only works against attaining stability sooner,” she said.

Speaking at the 21st Annual National RCBs CEO Conference themed “Positioning Rural Banking at the Centre of Financial Services Delivery in Ghana – The Role of Stakeholders”, Mrs Addo Awadzi averred the Central Bank is confident about the outlook of the Ghanaian economy as the BoG is closely working with the Finance Ministry to negotiate a sound economic reform programme supported by the IMF to stabilise and transform the Ghanaian economy.

The local currency has depreciated by more than 40% against its anchor currency (dollar) since the start of they year – 2022.

As of last week Friday, October 14, 2022, the cedi had depreciated to a value of GHS 12 to $1.

The depreciation of the cedi is mainly due to the strengthening of the dollar which has recorded its highest appreciation against world currencies since the year 2000.

The dollar gas appreciated by 22% against the Yen, 13% against the Euro and 6% against currencies of emerging economies.

Appreciation of the dollar against world currencies contributes to increase inflation.

According to the IMF, a 10% appreciation of the dollar translates into a 1% increase in headline inflation.

The dollar’s appreciation against the cedi has contributed to the country’s 21 year record high inflation of 37.2%.

Inflation untamed as it rises to 37.2%

Inflation rate in September had accelerated much faster  than expected to the highest level in almost 21 years  reaching 37.2%.

The rate was mainly driven by Housing,  Water, Electricity, Gas and Other Fuels which saw a 68.8%  rise in inflation compared to 46.7% in August followed by Furnishings, Household Equipment and Maintenance  (51.1%); Transport (48.6%); Personal Care, Social Protection  and Miscellaneous Goods and Services (42.6%) and Food  and Non-Alcoholic Beverages (37.8%).

The surge in inflation  in Housing, Water, Electricity and Other Fuels group was  influenced by the implementation of the utility tariff in  September 2022. The month-on-month inflation between  August 2022 and September 2022 stood at 2.0%.

The  headline inflation rate is more than double the upper ceiling  of the central bank’s inflation target band of 8+/-2%. 

Food inflation increased to 37.8% which is up from August’s  food inflation of 34.4%. Non-food inflation stood at 36.8%,  compared to 33.6% recorded the previous month.

Overall  month-on-month food inflation was 2.2% while non-food  inflation stood at 1.7%. Inflation for imported goods was  40.7% while inflation for local goods was 35.8%. For six (6)  months running, inflation for imported items exceeded domestic inflation.

At the regional level, the Eastern Region  recorded the highest inflation rate of 47.1% while the Upper  West Region recorded the lowest inflation rate of 22.9%.