Ghana’s annual inflation rate increased to 3.7 percent in May, rising for the second consecutive month. This figure is up from 3.4 percent in April, according to data from the Ghana Statistical Service. The continued increase suggests that the Bank of Ghana (BoG) will likely delay further interest rate cuts.
This acceleration in inflation was caused by rising costs for food, energy, and imported goods. Food inflation jumped to 3.3 percent from 2.2 percent in April, with higher prices for vegetables, tubers, and prepared foods. Housing, water, and energy costs also put pressure on prices, increasing by 11.8 percent year-on-year.
This renewed inflationary pressure complicates the economic outlook for Ghana. Although headline inflation remains below the BoG’s medium-term target, the trend is concerning. The cedi has also weakened by about 11.5 percent year-to-date through June 3, despite the central bank supplying over USD 5.7 billion to the foreign exchange market. This currency depreciation further fuels imported inflation, impacting consumer purchasing power.
Analysts at Databank Research attributed the latest inflation increase to cost-push pressures across the economy. "Rising fuel prices, higher utility costs and a turnaround in imported inflation from negative territory earlier this year contributed to broader price increases across the consumer basket," they stated. Apakan Securities also noted that inflationary momentum is strengthening, partly due to the cedi's 7.65 percent monthly depreciation and unfavourable base effects.
The BoG’s Monetary Policy Committee (MPC) will face a complex decision at its next meeting in July. Its May meeting saw the MPC maintain the policy rate at 14 percent, citing balanced risks to the inflation outlook. However, the recent inflation data might shift their stance. Financial markets will closely watch for any signals from the BoG regarding its monetary policy direction. Continued inflation could lead to a prolonged pause in rate cuts, impacting borrowing costs and investment decisions.
Expectations for inflation growth are high among market analysts. Databank Research forecasts inflation to accelerate further in June, projecting a range between 5.29 percent and 5.56 percent. This outlook considers persistent high energy costs, rising food prices, recent cedi weakness, and ongoing pass-through effects in domestic supply chains. Apakan Securities highlighted that fresh tomato prices surged due to lean harvest seasons and trade disruptions from Burkina Faso, contributing to the monthly food inflation rise to 2 percent from 0.8 percent in April.
The BoG faces external pressures as well. Several MPC members previously warned that rising global crude oil prices, potentially exceeding US$100 per barrel, and geopolitical tensions could reverse Ghana's disinflation gains. One member cautioned that inflation could surpass 10 percent by year-end if high oil prices persist, arguing against premature easing. Such a scenario could force the central bank into a more aggressive tightening cycle later.
Other committee members pointed to growing inflation expectations among households and businesses. They also highlighted pending utility tariff adjustments and emerging foreign exchange demand pressures. These factors underscore the need for a cautious policy stance. The interaction between inflation and exchange rate developments remains critical for Ghana’s economic stability in the coming months.