Ghana Inflation Accelerating to 12.6% Pressures Central Bank

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Ghana’s inflation rate jumped to the highest level in almost five years in December, underscoring the dilemma the central bank faces in trying to balance its efforts to curb price growth and boost the economy.  

Annual inflation accelerated to 12.6% from 12.2% in November, Government Statistician Samuel Kobina Annim told reporters Wednesday in Accra, the capital. That’s the highest rate since April 2017, exceeding the finance ministry’s forecast of 8% and topping the median estimate of 12.5% projected by six economists in a Bloomberg survey. Prices climbed 1.2% in the month.

Headline inflation, fanned by higher costs of housing, water, electricity and gas, has now breached the ceiling of the central bank’s 6% to 10% target range for a fourth consecutive month. 

Food inflation slowed to 12.8% from 13.1% in November, while non-food price-growth accelerated to 12.5% from 11.6%.

The Bank of Ghana in November raised its benchmark interest rate by 100 basis points and cited “significant” inflation risks, including a sell-off of government bonds that caused its currency to depreciate. With inflation continuing to accelerate and dollar-denominated government debt trading at distressed levels, policy makers may be persuaded to raise interest rates again when they next meet on Jan. 25.

The full effects of the November rate hike on inflation have yet to filter through, but demand pressures from the Christmas season and the limited supply of goods and services are expected to feed into price growth through January, Courage Boti, an economist at Accra-based Databank Group, said ahead of the release.

“That makes a stronger case for another policy rate hike just to contain inflation,” he said.

The yield on Ghanaian dollar bonds maturing in 2026 eased marginally after the release to 13.4887% at 10.23 a.m. in Accra. 

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