Ghana’s central bank said on Monday it expects a slight surge in inflation in the coming months due to ongoing exchange rate pressures and the increase in transport fares.
Addressing the media after the 118th Monetary Policy Committee (MPC) meeting, Bank of Ghana Governor Ernest Addison said the process to lower inflation remained slow over the first quarter of the year, as inflation increased from 23.1 percent last December to 25.8 percent by the end of the first quarter of 2024.
Addison attributed the surge in headline inflation to rising food inflation, driven mainly by seasonal food items in the inflation basket, which drove up food inflation to 29.6 percent in March before declining again to 26.8 percent in April.
Non-food inflation also increased to 23.5 percent from 22.6 percent over the same comparative period.
The governor warned that although the underlying inflationary pressures are well contained, there is a need to ensure that the recent depreciation of the local currency does not lead to unnecessary price hikes by businesses to induce inflation expectations.
“The latest forecast shows a slightly elevated inflation profile on account of recent exchange rate pressures and adjustments in transportation fares. However, the projections show that inflation will remain within the monetary policy consultation clause of 13 percent to 17 percent at the end of the year,” he noted.
The governor added that these forecasts depend on sustaining a tight monetary policy stance, including aggressive cash management.
To balance the expectation for economic growth and meeting the inflation targets against the need to stabilize the foreign exchange market, the MPC decided to freeze its benchmark lending rate at 29 percent.
Ghana’s medium-term inflation target has been set between six percent and 10 percent, but overspending, currency depreciation, and high public sector debts have kept inflation far above target since 2022.
The West African country secured a 3-0 billion US-dollar loan from the International Monetary Fund a year ago to support reforms aimed at reversing the downward spiral of economic fortunes.