Barring any unanticipated shocks, inflation is projected to gradually trend downwards but remain above the upper band of 8±2% until the end of 2025.

According to the May 2023 Monetary Policy Report by the Bank of Ghana, risks to the inflation outlook are fairly tilted to the downside supported by the relative stability in the exchange rate, reduction in ex-pump petroleum prices, alongside base drift effects.

This could mute the upward adjustments in administrative prices.

Given these considerations, the Monetary Policy Committee decided to maintain the Monetary Policy Rate at 29.5% in May 2023.

Headline inflation had already declined significantly by 12.9% between December 2022 and April 2023. “The percentage of items in the Consumer Price Index (CPI) basket with inflation exceeding 50% is receding, an indication of a return to the disinflationary path. Core inflation has also trended downwards, further supporting the disinflation process”.

However, inflation surged slightly to 42.2% in May 2023.

But the Bank of Ghana believes its latest forecasts suggest a disinflationary path on the horizon, supported by the monetary policy tightening, relative exchange rate stability, and some favorable base drift effects.

Domestic price developments

According to the Bank of Ghana, price developments since March 2023 pointed to further easing of inflationary pressures.

Headline inflation decelerated from a peak of 54.1% in December 2022 to 45.0% in March, and further down to 41.2 percent in April 2023, driven by both food and non-food prices.

Food inflation eased to 48.7% in April 2023, from 50.8% in March 2023, and 59.7% in December 2022. Nonfood inflation also declined to 35.4%, from 40.6% in March and 49.9% in December 2022.

The decline in headline inflation was occasioned by a deceleration in prices of both imported and locally produced goods.

Overall, the regulator of the banking industry said, price pressures have eased significantly across all items in the basket, largely supported by tight monetary policy, base-drift effects, relative stability in the exchange rate, and declining international crude oil prices and, in turn, downward adjustments in ex-pump petroleum prices.