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Economist urges Central Bank to halve food inflation to reduce overall inflation

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Economist Dr. John Kwakye has urged the Bank of Ghana (BoG) to collaborate with the government to cut food inflation by half.

According to Dr. Kwakye, achieving this would result in a 50% reduction in headline inflation.

The Government Statistician, Professor Samuel Annim, recently announced that April’s inflation rate had decreased to 25%.

Speaking at a press conference in Accra on May 8, Prof. Annim attributed this drop largely to a decline in food inflation, which recorded a rate of 26.8%—the lowest in 13 months—while non-food inflation stood at 23.5%.

“In April 2024, the consumer price index was 213.3, compared to 170.5 in April 2023. This translates to a year-on-year inflation rate of 25.0% for April 2024,” Prof. Annim stated.

“This means that prices of goods and services increased by 25.0% between April 2023 and April 2024. The April 2024 rate marked a 0.8 percentage point slowdown from the 25.8% recorded in March 2024,” he further added.

At the 118th Monetary Policy Committee press conference on May 27, BoG Governor Dr. Ernest Addison noted that global headline inflation remains above target in most countries, partly due to rising crude oil prices and increasing service sector costs.

Despite this, he projected a steady decline in inflation driven by tighter monetary policy, softening labor market conditions, and diminishing effects of past shocks.

Dr. Addison observed that inflation, which was 23.1% in December 2023, had risen to 25.8% by the end of the first quarter of 2024.

However, in April, inflation eased to 25% due to an improved supply of seasonal food crops, although non-food inflation increased due to exchange rate effects.

Food inflation declined to 26.8% in April 2024 from 29.6% in March 2024, while non-food inflation rose to 23.5% from 22.6%.

“Despite the sluggish disinflation process, underlying inflationary pressures are well-contained. Core inflation, excluding energy and utility items, moderated to 24.8% in April 2024 from 26.3% in March,” Dr. Addison added.

Commenting on these developments, Dr. John Kwakye, Director of Research at the Institute of Economic Affairs (IEA), questioned the relevance of the Policy Rate in addressing food inflation.

“If, as the BoG admits, food inflation is a major driver of headline inflation, what has the Policy Rate got to do with that? Why doesn’t the Bank work with the government to cut food inflation by half? That would eliminate almost 50% of headline inflation,” he said.

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