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Year-End Inflation Target Missed Narrowly   
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Grace Bediako - Government Statistician
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Year-on-Year Inflation in Ghana declined further in December 2009 and is set to ease further in the months ahead, the Government Statistician, Grace Bediako, reported last Friday at a meeting with the press.

December inflation fell to 15.97 per cent from 16.92 per cent recorded in prior month, lying narrowly above government’s year-end target of 14.5 per cent. The December inflation is the lowest recorded in 2009.

Even though the end-period inflation rate for 2009 was 2.16 percentage points lower than that of 2008, the average inflation rate for the past year, which was 19.29 per cent is the highest recorded since 2004.

Year 2009 started with extremely high inflation rates that peaked at 20.74 per cent in June, the highest level in over four years, and resulted largely from election year spending excesses. Strict fiscal and monetary discipline and stability achieved at the exchange rate front contributed in taming inflation in July and thereafter. According to Dr Bediako, the downward trend is sustainable through the coming months; explain from historic records trends ending a particular year in most cases, extended into the preceding year.

“What we’ve observed from previous years is that when we enter a new year with a particular trend, it continues the same for some time…. Barring any unexpected situations contrary to what we have been experiencing, we expect the current trend to continue,” she told the Financial Intelligence. Government expects inflation to slow down further this year to 9.2 per cent at year-end, with an expected annual average of 10.5 per cent.

Food inflation continued to have a dampening effect on inflation as a result of good local harvest, recording 11.84 per cent, whilst non-food inflation was 18.82 per cent for the month under review. The two major sub-components of the Consumer Price Index (CPI) have weights of 44.91 and 55.09 per cent respectively.

The monthly rate of inflation that indicates the change in price levels between November 2009 and December 2009 was however to 1.59 per cent, after recording 0.75 per cent in November. This was in line with the seasonal characteristic of price levels that usually move up with the Christmas festivities. Recreation and Culture that includes such items as entertainment, education expenses, newspapers and the likes, was the largest contributor to the inflation for the month under review and had remained so for most parts of 2009.

Health, Furnishing and household equipment, and some food products such as mineral waters, soft drink and juices are among others that pushed up price levels. In regional analysis, the Government Statistician stated that the Upper region (Upper East and West) recorded the highest inflation of 26.90 per cent whilst the Northern region recorded the lowest of 11.99 per cent.

Several economic analysts this paper spoke to following the latest report on the health of consumer prices say, they expect the monetary authority to respond appropriately to the disinflation trend by cutting its prime rate substantially at the next Monetary policy Committee (MPC) meetings expected shortly. The central bank dropped its prime rate by 50 basis points to 18 per cent in November last year, representing the first rate-cut in about three years.
Source: Financial Intelligence/Ghana

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