BoG Predicts 9.2% End of Year Inflation

With inflation-average change in price level expected to remain low till the end of the year, the Bank of Ghana has predicted an end of year inflation of 9.2 percent for this year.

This comes after the Bank of Ghana cut its policy rate-the prime rate from 15 percent to 13.5 percent on Friday. According to the Central Bank, the target would be achieved in part by lower food and petroleum prices as well as fiscal consolidation.

In its latest report on the economy released Friday by the Monetary Policy Committee (MPC) of the Bank of Ghana, the committee said it did not expect a significantly altered path of inflation in the second half of 2010.

“The inflation outcome for June 2010 captured the first round impact of the utility price adjustments announced at the end of May 2010. The second round effect is expected to work its way through the consumer basket in the second half of the year.”

The report stated that the anticipated slowdown in inflation in the medium-term, together with the need to restore the growth process, provided scope for monetary policy easing.

The drop in the prime rate by a 150 basis points was the third consecutive fall after the Central Bank cut the rate from 16 percent to 15 percent in April 2010. It is expected to reduce the cost of borrowing.

According to June 2010 figures released by the Ghana Statistical Service (GSS), food inflation inched up to 6.13 percent from 4.69 percent in May 2010, while the non-food inflation eased from 14.98 percent to 11.89 percent.

Alcoholic beverages, tobacco and narcotic; hotels and restaurants, recreation and culture in the non-food subgroup, and sugar, jam, honey, syrups, chocolate and confectionery; mineral water, soft drinks and juices recorded the highest inflation similar to that of March, April and May 2010.

Six out of the 11 sub-groups under the food component recorded inflation rates above the national average while vegetables including potatoes and other tubers, fish, bread, cereals and oil and fats recorded inflation below the national average.

Again, six out of the 11 sub-groups under the non-food component with an inflation rate of 55.09 percent, recorded an inflation rate that was higher than the national average. Health and communications recorded negative inflation rates.

Once again, Eastern Region recorded a single digit inflation of 0.98 percent compared with 3.58 percent in May 2010 followed by Greater Accra Region with 6.6 percent inflation (12.68 for food and 3.20 for non food). Ashanti and Northern regions followed suit, recording single digit inflations of 7.98 and 9.08 percent respectively.

Source: Daily Guide

 

Finance Minister hails achievement in inflation decline

The inflation rate fell for the 12th consecutive month in June to 9.52 per cent from 10.68 per cent in May, the Government Statistician said on Wednesday July 14.

The rate, which is the lowest since April 2007, has been helped mainly by declining food prices, Dr Grace Bediako said at a briefing in Accra.

The food and non-alcoholic beverages group has been recording single digit inflation rate since January 2010, falling from 9.08 per cent to 4.69 per cent in May 2010 increased to 6.13 per cent in June 2010.

The non-food inflation rate, on the other hand, though declining had been recording double digit inflation rates.

Inflation rates in the regions ranged from 0.98 per cent in Eastern Region to 17.22 per cent in Brong Ahafo Region. Eastern, Greater Accra, Ashanti and Northern Regions recorded inflation rates below the national rate of 9.52 per cent.

Dr Bediako said increased wages would not necessarily push up prices in the short-term, falling short of forecasting another decline in the rate in July.

“The trend we have seen is the decline and our hope is that whatever factors are responsible are maintained. However, the statistical service is not in any strong position to say it would come down,” she said.

In a statement, Finance Minister, Dr Kwabena Duffuor, has described the single digit inflation rate as refreshing news and said the stabilisation programme was on course and all targets set were within reach in just about 18 months of President Mills’ administration.

“The success of our counter inflation policy has been exceptional and has surpassed expectation. This is a major achievement that brings widespread economic benefits because inflation distorts resource allocation in the economy, hurts the poorest members of the society, creates uncertainty and arbitrarily redistributes income and wealth”.

“Again it undermines macroeconomic stability and makes sustained rapid growth impossible to achieve. As a result, getting to an inflation rate of 9.52 per cent is an impressive turn around in such a short time,” Dr Duffuor said.

He said the chronic fiscal imbalances of 2008 resulted in persistent inflation over the last two years therefore, bringing the fiscal situation under control had been essential to the success of the counter inflationary policy and the macroeconomic stability that Ghanaians were currently enjoying.

“Government is therefore committed to implementing policies that would ensure a lowering of domestic interest rate and reduction in exchange rate volatility so as to enhance business confidence,” the Finance Minister added.

Dr Duffuor said government’s objectives of gradually moving to an overall fiscal balance would also help to strengthen the macroeconomic policy framework and free resources for essential infrastructure and other programmes.

“It is therefore important that we focus on the target we have set for ourselves in the 2010 Growth and Stability Budget,” Dr Duffuor said.

Source: Citifmonline.com