BoG Governor agrees with Fitch Ratings ‘elevated inflation’ outlook
Governor of the Bank of Ghana (BoG), Dr Ernest Addison has said underlying inflation pressures are elevated highlighting risks to inflation outlook for 2022.
According to the Governor, uncertainties surrounding food prices and petroleum price adjustments are likely to exert inflationary pressures in inflation outlook for next year.
Dr Addison’s assertion confirms a position already stated by credit rating agency, Fitch Ratings, which noted in its December 2021 Africa Monitor Report that the country’s inflation remains on an elevated path.
According to the agency, the country’s headline inflation will be driven by upward price pressures arising from sustained high fuel prices and transport costs, a weak local currency [cedi], and an uptick in food inflation.
Speaking at the 2021 Annual Bankers Week Dinner of the Chartered Institute of Bankers, Dr Addison noted, “The economic outlook for 2022 is positive although there are some potential risks which should be closely monitored. In particular, the uncertainties surrounding food prices, petroleum price adjustments, and the potential second round effects of these are likely to exert inflationary pressures in the outlook.”
Touching on the Bank’s decision to hike the prime rate in view of the rising inflation rate, Dr Addison averred that, “As is the case globally, inflation has trended up to 11.0 percent in October 2021, outside the medium-term target band of the Central Bank, due to both supply (food prices) and demand (petroleum price pressures) shocks. Underlying inflation pressures are also elevated, highlighting the risks to the inflation outlook.
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“The above developments informed the MPC’s assessment of the emerging risks and threats to inflation, particularly as these supply side constraints become embedded in general price setting behaviour. To prevent the potential risk of de-anchoring inflation expectations in the outlook, and undermining the price stability objective of the central bank which has underpinned and supported the broad-based recovery we have experienced so far, the MPC raised the Monetary Policy Rate by 100 basis points.”
Inflation hit 11% pushing above Bank of Ghana’s target as non-food prices surge…
Recorded inflation rate for the month of October, exceeded the central bank’s target band for a second straight month, making it the highest inflation recorded since May 2020.
Annual inflation accelerated to 11% in October from 10.6% in September.
Government Statistician Professor Samuel Annim announcing the inflation rate for October, said the Month-on-Month inflation between September 2021 and October 2021 was 0.6 per cent with food inflation for October 2021 recording a relatively less increment than non-food inflation which climbed 1.6 percentage points.
He stated that transport, which included fuel, recorded the highest variation of 5.2 percentage points between October 2021 of 14.9 per cent and the percentage 12-month average of 9.7 per cent.
“Contribution of food inflation to overall inflation continues to slow down by 3.7 percentage points,” he pointed out.
Inflation for locally produced items continued to dominate imported items but with a reduced margin from 3.4 to 3.0 percentage points.
Inflation for imported goods was 8.8 per cent, higher than the 8.1 per cent recorded in September, while the inflation for locally produced items was 11.8 per cent, up from the 11.5 per cent recorded in September.
