Ghana’s inflation pushed higher in July by weak cedi
Ghana’s annual inflation rate increased for the fifth month in a row in July, driven higher by the weak cedi currency which increased the cost of imported foodstuffs, Ghana’s statistics office said on Wednesday.
The slight increase still keeps inflation within the Bank of Ghana’s targeted band of single-digit inflation this year in one of Africa’s fastest growing economy, but far from the low 8.3 percent recorded in the same period last year or the high 20.50 percent seen in July 2009.
The rise from 9.5 percent in July from 9.4 percent the previous month highlights mounting price pressures in the West African nation’s economy, but was slower than analysts expected.
“The exchange rate depreciation has made some imported foods more expensive and their weight on inflation is huge,” said Ebo Duncan, Ghana’s director of economic statistics.
Harvests in the coming months should ease food inflation but Spending linked to an election due in December and an 18 percent public sector salary wage increase, backdated for the months of Jan-April, due to be paid out in August, means inflationary risks remain stacked to the upside, analysts said.
“Inflation in local food products at 4.9 percent, was lower than that of imported food products at 9.1 percent,” Duncan said.
Non-food inflation was at 12 percent with transport recording the highest rate of increase at 20.6 percent.
The overall monthly change was 0.7 percent for July 2012 compared with 1.4 percent for June 2012.
As one of the world’s top cocoa producer and Africa’s second biggest gold producer behind South Africa, Ghana, which started producing oil in 2010, has been attracting huge inflows of foreign investments, fueling its economic growth.
Yvonne Mhango, Sub-Saharan Africa economist at Renaissance Capital, said the increase in inflation was “very modest” given the cedi had depreciated by 29 percent against the dollar in the year to July.
The cedi-dollar rate was at 1.9405 by 1145GMT on Wednesday, according to Reuters data.
“We expect inflation to be in the early double-digits at (the end of 2012),” Mhango said, adding that any further slip by the cedi was likely to lead to a rate hike in September.
“If the cedi exhibits further weakness in the following weeks, the MPC meeting may be compelled to take action and hike by about 50 basis points,” she said.
Ghana’s central back is expected to hold its monetary policy committee meeting from September 10-12.
The bank raised prime interest rate by 50 basis points to 15 percent in June, the third rate hike this year in its quest to fend off mounting inflation and stabilize the local cedi currency.