Lower Production Cost To Result In Single Digit Inflation

The Bank of Ghana (BoG)’s medium term inflation target could be attained should government tackle challenges facing the supply of critical services in the country.

This is the position of Economist, Adu Owusu Sarkodie.

“If the supply side of inflation is addressed together with the demand side which mainly borders on money supply, then I am sure the single digit inflation would be achieved hopefully by the end of the year,” he told Citi Business News.

According to the central bank, signs of a further drop in inflation to single digits by mid 2018 were among the factors that influenced the drop in its lending rate to 22.5 percent.

Governor of the Bank of Ghana, Dr. Ernest Addison explained that, “The results of the latest survey conducted by the Bank point to continued declines in inflation expectations by businesses and the financial sector.”

“The forecast horizon for inflation remains unchanged and inflation is expected to trend downwards towards the medium-term target of 8±2 percent in 2018.”

This projection however comes on the back of a pickup in inflation to 13% in April 2017 from 12.8 percent in March 2017.

The rise has been attributed to the increase in transport fares by 15 percent early this year.

This is however against a drop in Producer Price Inflation which recorded 4.8 percent, down from the 6 percent recorded in March this year.

Mr. Adu Owusu Sarkodie believes the trend could be sustained if persistent production constraints are addressed.

“For some time now the utility prices have not been increased likewise have petroleum prices not seen any changes. So it is just the pockets of power outages that perhaps may affect production challenges facing businesses,”

“We will also need to address the post harvest losses which cause food inflation in the country,” he added.