Inflation or average change in price of goods and services within a period is expected to ease in the second, third and fourth quarter of this year towards the central target of 8% +/-2, the Bank of Ghana’s Inflation Outlook Report has revealed.

This will be driven by lower inflation expectations and real marginal costs barring any unforeseen shocks.

Headline inflation ended the year at 10.4 percent in December 2020, marginally above the upper band of the medium-term target of 8±2 percent. It is however presently hovering around 10.3%.

According to the report, the baseline forecast indicates a return of inflation to the medium term target band by the second quarter of 2021, supported by easing food price pressures, stable exchange rate, and well-anchored inflation expectations.

The decline in inflation from an average of 10.8% in the third quarter of 2020 to an average of 10.1% in the fourth quarter was mainly driven by the dissipation of non-food supply shocks reflecting the pick-up in production and trade associated with the easing of Covid-induced restrictions

Meanwhile, the real interest rate is expected to remain marginally above trend in the near term due to well-anchored inflation expectations before returning to trend levels in the forecast horizon.

The report also said the real exchange rate is forecast to be broadly close to fundamentals as inflation differentials narrow in the outlook.

Presently, interest yield of Treasury bills (91-day) is hovering around 12.8%, whilst that of 182-days is going for about 13.5%.

February inflation hits 10.3%

The year-on-year inflation rate rose to 10.3% in February 2021, compared to 9.9%, the previous month.

The rate was 0.4 percentage points higher than the rate for January 2021.

The month-on-month inflation between January 2021 and February 2021 was however 0.8%.

Non-food inflation rose to 8.8% from the January 2021 rate of 7.7%, whilst the Food and Non-Alcoholic Beverages inflation fell to 12.3%, from 12.8% in January 2021.