Inflation to remain above medium-term target band of 8±2% – BoG

The Bank of Ghana has said that inflation will remain above the medium-term target band of 8±2% in the near term.

This is due to the probable adjustments in transportation costs, increase in ex-pump prices, the proposed adjustment in utility prices, tight external financing conditions, heightened inflation expectations, persisting food price pressures, and increased production costs.

In its May 2022 Monetary Policy Report, the Central Bank said the risks to inflation outlook remain broadly tilted to the upside, driven by price pressures from both foreign and domestic sources.

“Global price pressures have intensified and broadened beyond the volatile items of energy and food, underpinned by the spillover effects of global supply chain bottlenecks, the Russia-Ukraine war and China’s zero-COVID policy, along with elevated aggregated demand pressures as the global economy recovers.”

“This has prompted some coordinated monetary policy tightening in Advanced Economies and most Emerging Market and Developing Economies and triggered tightened global financing conditions. Consequently, global inflation and inflation expectations are expected to remain elevated in the near term. These risks are likely to further induce domestic inflation in the coming months, especially if the current pressures persist”, it added.

On the domestic front, the report said the upward adjustments in petroleum products and transport fares with attendant second-round effects on goods and services, have pushed up inflation and inflation expectations.

In the outlook, it added the heightened uncertainty in energy prices, prolonged global supply chain holdups, the passthrough of the recent exchange rate depreciation, and upward adjustments in ex-pump petroleum prices and transportation costs, present significant upside risks and are expected to exert pressures on domestic prices in the near term.

“The continued uncertainties surrounding food prices is also likely to add to the upside risks to the inflation outlook. On the downside, it is expected that monetary policy tightening, in tandem with the announced fiscal consolidation efforts, would help moderate inflationary pressures in the outlook”, the Central Bank report stressed.

Inflation hit 27.6% in May 2022, the highest in over 15 years.