Special Update: Ghana Inflation

Thursday, May 12, 2022

Key Highlights:
Historical Trend for Ghana’s Headline Inflation
• Headline Inflation touches new all-time high (rebased series) as 24.0% Headline Inflation (%)
energy and food price pressures persist. Food Inflation (%)
Non-Food inflation (%)
• Further upside to inflation expected in May-2022, and the BoG’s
19.0%
MPC is likely to hike policy rate by at least 200bps to try to rein in
inflation and expectations.
• Money market yields to trend higher as investors ask for positive 14.0%
real returns.

Consumer prices continued to march higher in Apr-2022, posting an 9.0%

11th consecutive rise from the May-2021 lows. Headline inflation
rose to 23.6% y/y from 19.4% y/y in the previous month. The 4.0%
increase was underpinned by upside pressures to both the food and

Oct-2018

Oct-2019

Oct-2020

Oct-2021
Jan -2018

Jan -2019

Jan -2020

Jan -2021

Jan -2022
Jul-2018

Jul-2019

Jul-2020

Jul-2021
Apr-2018

Apr-2019

Apr-2020

Apr-2021

Apr-2022
non-food baskets. On a month-on-month basis, overall prices
increased by 5.1%.

Food Inflation Inflation & Rates

Food inflation continued to climb higher during the month under 22.0%
Policy rate
review. Food prices grew by 26.6% y/y in Apr-2022 compared with an 20.0% Headline Inflation (%)
annual growth of 22.4% in Mar-2022. All sub-classes within the food Avg . 91-day T/Bill Yield
18.0%
group recorded higher inflation except the vegetables & tubers sub-
class which moderated for the first time in 4 months to 20.5% y/y. 16.0%
On a month-on-month basis, food prices increased by 5.8% while the 14.0%
overall contribution of food to the inflation basket reduced to 50.0%
12.0%
from 51.4% in Mar-2022.
10.0%
Non-food Inflation
8.0%
Items within the non-food basket recorded an average price jump of
21.3% y/y in Apr-2022 from 17.0% y/y in the previous month. The 6.0%
Oct-2018

Oct-2019

Oct-2020

Oct-2021
Jul-2018

Jul-2019

Jul-2020

Jul-2021
Apr-2018

Apr-2019

Apr-2020

Apr-2021

Apr-2022
Jan -2018

Jan -2019

Jan -2020

Jan -2021

Jan -2022
increase is on the back of a broad-based upward price pressures on
all 12 sub-classes, led by the transport sub-division. The impact of
elevated crude oil prices and exchange rate dynamics led transport
costs higher at 33.5% y/y while housing & utility costs rose by 28.5%
y/y. Non-food prices rose by 4.6% m/m. Annual Growth of Items in the Non-food Basket
Inflation Outlook & Implications for Rates 21.30%
Transport 33.50%
We perceive further upside risks to inflation in May-2022 and
Furnishings, hous ehold… 28.50%
through Q2-2022. Although Cedi depreciation pressures have waned
as USD liquidity gradually returns to the market, the ongoing war Hous in g, water, electricity, gas… 25.00%
between Russia and Ukraine could sustain higher food and energy Personal care, social protection… 23.20%
costs. Additionally, the implementation of the 1.5% E-Levy and the Recreation, sport and cu lture 22.30%
recent 20% increase in public transport fares will pose further upside
Restaurants an d… 16.50%
risks to prices going forward. With the latest inflation print at 23.6%,
the spread between inflation and money market rates has widened Alcoholic Beverages, Tobacco &… 16.30%
further while the real policy rate remains negative. Within the Clothing and footwear 15.60%
context of the persistent inflationary environment, we think the BoG Information and communication 15.50%
will tighten the MPR further as the MPC’s aggressive stance in Mar- Health 10.00%
2022 signaled a firm willingness to tighten to rein in inflation. Our
Insu rance an d financial services 10.00%
expectation is a hike of at least 200bps at the May-2022 meeting
with another potential increase in July. On the money market, we Education services 3.70%
expect yields to maintain its upward trend as investor push for
positive real returns and as GHS liquidity conditions remain tight.
0%

%
10

20

30

40
Special Update: Ghana Inflation

Analyst: Edem N. Kporku (edem.kporku@constantcap.com.gh)

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