The general price levels of goods and services, for the second time since the beginning of the year, has seen another drop, making a strong case for the central bank to consider a policy rate cut later this month.
Data released by the Ghana Statistical Service (GSS) show that inflation for June has decreased by 0.3 percentage points to 9.1 percent from what was recorded in May. This was occasioned by both declines recorded in the food and non-food baskets.
The year-on-year non-food inflation rate for June 2019 was 10.3 percent compared to 10.6 percent in May. Whereas, that of food inflation rate for June 2019 was 6.5 percent, compared with 6.7 percent in May 2019. Locally produced goods also continued recording rates lower than imported goods as the former recorded 8.2 percent and the latter 11.3 percent, a 3.8 percentage points higher.
The June 0.3 percentage point decline in inflation comes as somewhat a reprieve for the central banks as, for two consecutive times this year, it has maintained policy rate at 16 percent due to rising inflation. Inflation rose by 0.5 percentage point from January to April, putting the Monetary Policy Committee (MPC) on red alert, hence, the decision to stay policy rate.
But with a 0.4 percentage point decline since April when the rate hit 9.5 percent, it provides some room for the MPC to, at least, reduce the policy rate marginally.
Economist at the University of Ghana, Dr. Ebo Turkson, also supported this position when contacted for his comments. He said he does not expect anything less than a policy rate stay in the announcement by the MPC. “Once inflation is still declining, it makes a good case for a policy rate cut but there are other factors that also go into deciding on the policy rate. The strength of our cedi against the dollar and other major trading currencies will also be a determining factor, so it is not just the inflation. Of course, inflation is the most important of them, once it is declining you should expect a policy rate cut. But in the worst-case scenario, the policy rate will be maintained,” he said in an interview with B&FT, a local newspaper.