Cedi’s weakness pushes October inflation above 40%


The annual consumer inflation rate increased to a 17th straight month high in October 2022, hitting 40.4 percent – the highest reading since July of 2001.

This is up by 3.2 percentage points from 37.2 percent in the prior month and nearly 4.04x beyond the Bank of Ghana’s upper band policy target of 10 percent; and far outside the long-maintained medium-term policy range.


According to Ghana Statistical Services (GSS), the increase comes largely on the back of price pressures due to the local currency’s depreciation – particularly over the past month, as well as the rise in fuel prices and full effects of utility rates hikes.

From the data released yesterday, five divisions recorded inflation rates higher than the national average.

The GSS observed a wide disparity across the 13 divisions with year-on-year (y-o-y) housing, water electricity, gas and other fuels leading by 69.6 percent; followed by furnishings, household equipment and routine household maintenance (55.7 percent); transport 46.3 percent and personal care, social protection and miscellaneous goods and services (45.5 percent); and food and non-alcoholic beverages (43.7 percent).

Food Inflation

Focusing on food inflation on a year-on-year basis, inflation was logged at 43.7 percent – a 5.9 percentage point rise above the previous month at 37.8 percent. This is followed distantly by housing, water, electricity and gas (17.8 percent), and transport at 11.7 percent.

Eight subclasses recorded higher rates. This was led by water (64.3 percent) followed by milk, other dairy products and eggs (58.9 percent); and sugar, confectionery and desserts (54.6 percent).

Constant cost pressures and cedi depreciation

Under constant cost pressures and cedi depreciation, the country’s headline inflation increased to a multi-year high through the first three-quarters of 2022.  In the first nine months of 2022 (9M22), headline inflation rocketed up by an amazing 24.6 percent – reaching a 21-year high of 37.2 percent in September.

The pace of inflation picked up as the GH cedi suffered losses against the US dollar after a wave of sovereign debt downgrades deepened the exchange rate pass-through to inflation.

Also, disruptions to global supply chains due to the Russo-Ukrainian war contributed to increased input and freight costs; increasing the cost of production and filtering into consumer price inflation.

Market watchers anticipate it to rise further in the fourth quarter, on the back of higher utility tariffs, appreciation of the US dollar globally with its effects on imported inflation, and the hike in domestic fuel prices.

Demand for food ahead of the yuletide season and higher prices for imported food items are also expected to drive up food costs.

The GSS inflation data show that imported inflation stands 43.7 percent compared to 39.1 percent for domestic inflation.

Databank in its analysis remained pessimistic about inflation for 4Q22, due to increasing global uncertainties.

“We raise our end-of-2022 inflation projection to 43% ± 100bps due to depreciation and increasing cost pressures.”

Further to this, the hike in domestic utility tariffs is expected to fan the inflation flame. The Public Utilities and Regulatory Commission (PURC) sanctioned hikes in electricity (+27.15 percent) and water (+21.55 percent) tariffs after a recommendation from the service providers.

“We believe the tariff hike is yet to translate through prices fully, and remains a significant risk to the inflation outlook,” the investment bank said. “Increments in ex-pump petroleum prices and resultant increases in transport fares will likely exert further inflationary pressure.”

Monetary policy action

The Monetary Policy Committee (MPC) of the Bank of Ghana has thus far increased the benchmark policy rate by an unprecedented 1,000 basis points (bps) to 24.5 percent in response to the ongoing rise in inflation.

The market has expressed a view that the persistent surge in inflation despite the central bank’s aggressive policy rate hikes is indicative of a harsher, multifaceted inflationary environment.

With the current rate of inflation at 40.4 percent, the central bank may be pressured to further hike the policy rate in order to re-anchor inflation expectations and return to a disinflation path.

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GNBCC | News