Inflation on Course to Inch Closer to the Medium-Term Target

The ongoing gains being witnessed in some key macroeconomic variables trickled down to impact the consumer price index as the headline inflation rate for May saw its sharpest decline since January 2024. The latest inflation reading tumbled for the fifth consecutive time as it fell to its lowest in more than three years to 18.4% in May, having declined from 21.2% in the previous month and from 23.5% at the start of the year. The month-on-month inflation reading similarly saw a decline, recording a dip from 0.8% in April to 0.7% in May.

The drastic easing of pressures on the consumer price index has been supported by the strengthening of the local currency, which has as of the close of May appreciated by 30.0% against the Dollar, as well as the decreases in the prices of fuel and transport cost. Despite these significant improvements in consumer prices, some critical food items such as yam, smoked herrings, fishes, vegetable oil, and ginger continue to mount intense pressures on consumer prices, with the statistical office charging the government to invest in post-harvest storage, transport infrastructure, and irrigation to stabilize food prices further.

Food inflation saw its biggest decline yet this year as it declined to 22.8% in May, down from 25.0% in April, with ten out of the observed fifteen food items recording rates below the group’s average. Although month-on-month food inflation remained unchanged at 0.9% in May, thirteen of the observed food items showed disinflation, with their prices registering a decline. More specifically, fruits & nuts recorded a deflation with a rate of -3.8%, down from 0.1% in April.

The non-food inflation category maintained its downward streak, easing from 20.3% at the close of last year to end May at 14.4%, with a sharp fall of 350 basis points (bps) between April and May. Month-on-month inflation for this category eased from 0.7% in April to print at 0.6% in May, mainly on the back of disinflation recorded by transport; recreation, sport & culture; and alcoholic beverages, among others. This notwithstanding, some key non-food items such as restaurants & accommodation and household equipment underwent increases between April and May.

Across the regions, the inflation rate hovered between 14.5% in the Ahafo region and 38.1% in the Upper West region. Inflation on local items saw a massive dip, down by 350 bps to inch closer to the inflation on imported items. Inflation on local and imported items fell concurrently to 19.2% and 16.4%, respectively.

The May sitting of the Monetary Policy Committee saw the central bank remain glued to its tougher stance against inflation as it stayed the policy rate at the current 28.0% despite the slowdowns in the inflation readings. The committee warned that the current level of inflation remained high relative to the medium-term target, which required maintaining the tight stance to reinforce the disinflation process.