Ghana's October inflation reaches 4-month high at 22.1%

Inflation in Ghana continued its upward trend for the second consecutive month in October, reaching 22.1 per cent, marking a four-month high after pausing a six-month disinflation in September. The Institute of Economic Affairs highlighted that Ghanaians currently allocate about 43 per cent of their income solely towards food expenses, painting a challenging picture of affordability and economic stability in the country. To discuss the implications of this rising inflation rate, Wilson Zilevu, a fixed-income and economic analyst at Databank, provided valuable insights during an interview with CNBC Africa. Zilevu pointed out that the inflation surge was mainly driven by increases in both food and non-food prices, with mounting demand pressures as the festive season approaches and heightened campaign-related expenditures adding to the inflationary environment. Upon closer examination, it was revealed that the surge was predominantly fueled by non-food inflation rather than food inflation, primarily due to escalating costs of imported goods making their way into the market. This has resulted in a steady rise in prices in the non-food sector, a trend that has contributed significantly to the overall inflation rate. Despite the current challenges, Zilevu expressed optimism that inflation might begin to trend downwards by the year's end. The analyst emphasized the importance of managing inflation expectations to bring the rate within a desired target range. While criticisms have been raised regarding the timing of monetary policy decisions, Zilevu stressed the underlying principle of controlling inflation expectations as a key goal of the policy measures. He defended the concept of monetary policy as a tool to address both demand-pull and cost-push inflation, acknowledging that while timing critiques may be valid, the fundamental objective remains essential for maintaining economic stability. Transitioning to the realm of fiscal policy, Zilevu commended the government's efforts in navigating the fiscal landscape amidst the challenges posed by an ongoing IMF program and an approaching election in December. Despite the complexities of balancing expenditure priorities and economic prudence, the government has reportedly demonstrated resilience in maintaining fiscal discipline throughout the year, garnering positive reviews from the IMF. Zilevu highlighted the importance of fiscal responsibility in the current economic climate and underscored the role it plays in supporting the broader monetary policy objectives aimed at curbing inflation. As Ghana grapples with rising inflation rates and economic uncertainties, the collaborative efforts of monetary and fiscal authorities will be crucial in steering the country towards a path of sustainable growth and stability.