Inflation: Government is likely to miss its target for 2021

The government is likely to miss its end of year inflation target of 8 percent.

This comes in the wake of a sharp rise in inflation for the month of September 2021.

Year on year inflation measured by the Consumer Price Index, (CPI) has recorded 10.6 percent for the 12 months ended September, 2021 from 9.7 percent recorded in August 2021.

The recent hike in the inflation rate is slightly above the Bank of Ghana’s medium-term target band of 8±2 percent.

According to the governor of the Bank of Ghana, (BoG), Dr Ernest Addison at the recent Monetary Policy Committee (MPC) press conference, “the latest forecast indicates that inflation will remain within the medium-term target band, but closer to the upper limit in the near-term, in the absence of further unexpected shocks.

A close monitoring of the inflation situation is however warranted to respond swiftly to prevent potential second round effects on headline inflation from the rising food inflation. The Committee stands ready to respond appropriately as needed if this particular risk materializes”.

The Oil Marketing Companies (OMCs) and the National Petroleum Authority (NPA) have indicated that prices of fuel will be adjusted upwards by at least 7 per cent at the pumps starting last week Saturday.

According to the Ghana Statistical Service, the increase in the price of Housing, Water, Electricity, Gas and other Fuels (18.7%) triggered the hike in inflation.

The month-on-month inflation between August and September 2021 was 0.6% (0.3 percentage point higher than what was recorded in August 2021).

Food inflation (11.5%) in September 2021 was higher than last month (10.9%) and just above the average of the previous 12 months (10.4%). However, Food inflation contribution to total inflation dropped from 50.2% last month to 48.6% in September 2021.

Overall month-on-month food inflation was 0.0%. Vegetables, coffee and coffee substitutes, and cereal products were the only subclass that recorded a negative month-on-month inflation.

For non-food, year-on-year inflation on average went up this month compared to last month. It went up to 9.9% from 8.7%.

Out of the 13 division, six had higher year-on-year inflation than the rolling average over the last 12 months. Transport (13.6%) was the division that recorded the biggest difference in this month’s inflation compared to the 12- month rolling average.

Housing, Water, Electricity and Gas recorded a relatively high inflation (18.7%) this month compared to the rolling average (20.0%).

The inflation rate for imported goods was 8.1 % (same as recorded for last month), while the inflation for locally produce items was 11.5%, up from the 10.3% recorded last month.

The Volta region recorded the highest month-on-month inflation for September 2021 of 3.6%.

However, Upper West region recorded the highest inflation rate of 16.8%, followed by Northern region with 15.2%.

Greater Accra region registered an inflation rate of 12.9%, whereas the Ashanti recorded a rate of 11.7%

Transport either recorded positive month-on-month inflation or remained unchanged across all the regions.