Inflation continues downward trend — Dips to 20.4% in August
The rate of inflation in the country continued a downward trajectory, dropping from 20.9 per cent in the month of July to 20.4 per cent in August.
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This is on the back of the significant reduction in food inflation which moved from 21.5 per cent in July to 19.1 per cent in the month under review. Non-food inflation also witnessed a hundred basis point decline from 21.5 per cent to 20.5 per cent in August.
Government Statistician, Professor Samuel Kobina Annim, who announced the new rate, explained the new rate, saying the year-on-year rate of inflation for August 2024 was 20.4 per cent which means that in the month of August, 2024, the general price level was 20.4 per cent higher than August 2023.
Again, he said the month-on-month inflation between July and August 2024 was -0.7 per cent.
While inflation on locally produced items also dipped from 23.3 per cent in July to 22.2 per cent in August, inflation on imported items on the other hand moved up slightly to 16.1 per cent in August as against 15.6 per cent the previous month.
The highest regional inflation rate of 27.8 per cent was recorded in the Upper East Region while the lowest regional inflation was recorded in North East with 10.1 per cent, a rate which is below the national average.
Definition and measure of CPI
In measuring the inflation rate, price collection was done in 57 markets. Prices were collected from about 8,337 outlets for approximately 47,800 products every month from all the 16 regions of the country.
Products were ordered in a hierarchy of 13 divisions, 44 groups, 98 classes, 156 subclasses and 307 items.
Prof. Annim said every item can only be part of one subclass, and every subclass can only be part of one class, among others.
Mixed expectations
Much as the inflation trend is expected to bring some relief to businesses and households, it is highly unlikely if the development will trigger a reduction in the benchmark policy rate which was maintained at 29 per cent by the Bank of Ghana (BoG) a couple of months ago.
The central bank had maintained that its decision to keep the policy rate at 29 per cent was premised on domestic developments, key among them being the rate of inflation.
“On domestic price developments, there is some uncertainty regarding the inflation path for the year, given recent exchange rate pressures, upward adjustment in utility tariffs and increases in ex-pump fuel prices.”
The above developments have resulted in a slightly elevated inflation profile for the year. Even though inflation is expected to remain within the target year band, the risks are tilted slightly on the upside,” the Governor of the BoG, Dr Ernest Addison, said.
According to him, this will require maintaining the strong monetary policy stance supported by strong fiscal consolidation efforts including remaining vigilant to ensure that the end-year inflation objectives are achieved.
“Given these considerations, the committee decided to maintain the policy rate at 29 per cent,” he added.
Interest rates have remained high due to the high benchmark policy rate and, therefore, a reduction, as a result of the easing inflation rate, could be a good omen to force interest rates down to make the cost of doing business more affordable for businesses in the country.