Inflation would have been worse without BoG policy rate hikes – World Bank
World Bank Country Director, Frank Pierre Laporte, has averred Ghana’s inflation would have been much worse had not the Central Bank hiked its monetary policy rate.
Speaking in an interview monitored by norvanreports, Mr Laporte quipped the recent policy rate by the Central Bank to rein in rising inflation was necessary and apt.
“Policy rate hikes by the BoG is a step in the right direction, otherwise inflation will spiral.
“Without BoG policies, Inflation would have been worse,” he stated.
Ghana’s headline inflation rate continued its upward trend as it recorded an annual rate of 33.9% in August, a 21 year record high.
This was the 15th straight month the country’s headline inflation had risen, it was also the 12th straight month the inflation rate had surpassed the upper limit of the Central Bank’s target band of 10%.
According to Government Statistician, Professor Samuel Kobina Annim, the rise in inflation rate can be attributed to imported inflation.
Annual imported inflation rose to 35.2% in August from 33.9% in July 2022, outpacing domestic price growth for a fifth month.
Inflation was also driven by Housing, Water, Electricity, Gas and Other Fuels which saw a 46.7% rise in inflation compared to 43.0% in July followed by Transport (45.7%); Furnishings, Household Equipment and Routine Household Maintenance (44.7%) and Recreation, Sport and Culture (36.4%).
Food inflation increased to 34.4% which is up from July’s food inflation of 32.3%. Non-food inflation stood at 33.6%, compared to 31.3% recorded the previous month. Overall month-on-month food inflation was 1.8%.
At the regional level, the Eastern Region recorded the highest inflation rate of 41.0%% while the Upper East Region recorded the lowest inflation rate of 22.8%.
The rise in imported inflation, Professor Samuel Annim, further attributed to the depreciation of the local currency (cedi).
The cedi has weakened more than 39% against the dollar this year and is the second-worst-performing currency in the world, after the Sri Lankan rupee.
The depreciation prompted the central bank to hold an emergency meeting in August, when it raised the key interest rate by 300 basis points to 22%, the biggest margin since at least 2002, bringing cumulative increases since November to 850 basis points.
The inflation data is unlikely to persuade the central bank to increase interest rates again when it announces its decision on September 26, 2022, unless a stabilisation in the currency since the August hike is reversed.
