The Bank of Ghana has said its latest forecast points to “elevated risks” to the inflation outlook in the forecast horizon, underscored by the recent jump in headline inflation.
After remaining flat at 7.8 per cent for three consecutive readings (January – March 2020), headline inflation surged in April to 10.6 per cent — outside the central bank’s inflation target band.
The “sharp rise in inflation is attributed to increased demand for food items stemming from the two panic-buying episodes preceding the market fumigation exercises across the country and the partial lockdown in both Accra and Kumasi—the two largest cities”, central bank Governor Dr Ernest Addison explained at the regulator’s Monetary Policy Committee meeting on Friday, 15 May 2020 at which he announced maintenance of the policy rate at 14.5 per cent.
He said the panic-buying situations “led to exaggerated food prices in April”, adding: “Food and non-alcoholic beverages prices rose to 14.4 per cent, significantly higher than the 8.4 per cent recorded in March 2020” while “non-food inflation increased to 7.7 per cent in April 2020 from 7.5 per cent in March 2020”.
“On the downside, relief measures on water and electricity tariffs and declining crude oil prices are likely to ease price pressures in the outlook”, saying: “The recent rise in inflation is projected to peak in the second quarter and begin to return to the disinflation path in subsequent quarters with inflation settling within the medium-term target band by the end of the year”.
On the growth outlook, Dr Addison said “baseline projections show a sharp downturn in GDP growth with the economy operating below capacity in the medium-term. Under the circumstances and given the balance of risks to inflation and growth, the Committee decided to keep the policy rate unchanged at 14.5 per cent”.