Ghana’s Inflation Rises Second Straight Month as Iran Conflict Stokes Prices

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(Bloomberg) — Ghana’s annual inflation rate edged higher a second straight month as the war in Iran fanned price pressures, increasing the likelihood that the central bank will keep interest rates on hold when it next meets.

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Consumer prices rose 3.7% year-on-year in May, compared with 3.4% in April, Government Statistician Alhassan Iddrisu told reporters during a press conference held online on Wednesday. Prices increased 1.1% in the month, up from 1% in the previous month. 

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The median estimate of four economists surveyed by Bloomberg was for inflation to advance to 4.3% in May.

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“Following the US-Iran war, world fuel prices rose and that has begun feeding into local fuel prices,” Iddrisu said. “Items that contributed the highest include fresh tomatoes, river fish and green plantain,” he said.

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Food and non-alcoholic beverage inflation accelerated to 3.3% in May from 2.2% in April, while non-food inflation was little changed at 4.1% from 4.2%.

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Oil and fertilizer prices have surged since the US and Israeli attack on Iran in late February, elevating food costs and risking broader inflation spillovers that central bankers want to contain.

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The Bank of Ghana held rates at 14% last month and warned the Middle East conflict was stoking prices and risked raising inflation expectations, while noting that it projects inflation will stay within its 6% to 10% medium-term target for the rest of the year. The next scheduled meeting of the monetary policy committee is July 22.

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“Ghana faces a double whammy of higher energy prices from the Iran war and domestic demand pressure for the dollar which is leading to a weaker cedi,” Agyapomaa Gyeke-Dako, an associate professor of economics at the University of Ghana Business School, said ahead of the release.

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The cedi has weakened 11% this year, compared with an appreciation of 44% in the same period of last year. It traded relatively unchanged at 11.7850 per dollar at 11:40 a.m. in Accra.

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The depreciation of the cedi “is normal,” Bank of Ghana Governor Johnson Asiama said last month, adding that the central bank has adequate foreign-exchange reserves to support the local currency where necessary. Ghana’s gross international reserves were $14 billion at the end of April, enough to cover 5.5 months of imports, compared with $10.8 billion or 4.7 months of imports cover a year earlier.

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The country is in “a very healthy position” to be able to withstand the price shocks emanating from the conflict in the Middle East, Finance Minister Cassiel Ato Forson told Bloomberg in an interview on Monday, forecasting inflation to end the year at no more than 5%.

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(Updates with currency moves and finance minister comment in final three paragraphs.)

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