(Updates with comment from statistics agency starting in third paragraph.)
July 13 (Bloomberg) -- Ghana’s inflation rate fell to 8.6 percent in June, the joint lowest level in 19 years, as increased agricultural output damped food prices.
Inflation slowed from 8.9 percent in May, Grace Bediako, a statistician at the Ghana Statistical Service, told reporters in the capital, Accra, today. The rate was last at this level in December, and hasn’t been lower since June 1992. Prices rose 1.3 percent in the month, Bediako said.
“The current inflationary trend may only reverse if fuel and utility prices go up,” she said. “Even then, moderating food inflation will tamper any excessive inflationary pressure.”
Good rains and a program to supply farmers with subsidized fertilizers have pushed up food supplies and damped prices. Food inflation eased to 2.8 percent in June, the slowest pace since September 1991, and down from 3.9 percent in May. Non-food inflation accelerated to 12.4 percent from 12.2 percent in May.
The effect of a 30 percent increase in gasoline prices on Jan. 4 by Ghana’s National Petroleum Authority is also easing. The increase pushed the inflation rate to 9.2 percent in February from 9.1 percent in January and 8.6 percent in December.
“Now it looks obvious that inflation will continue to slow into the third quarter and most likely close the quarter at 7 percent,” Sampson Akligoh, an economist at Accra-based Databank Financial Services, said in a telephone interview today. “Government’s plan to increase spending through a supplementary budget does not pose a fiscal threat, because of a six-month lag effect. That notwithstanding, a stable cedi will continue to support the disinflationary trend.”
After weakening as much as 5.7 percent against the dollar in the first five weeks of 2011, Ghana’s cedi has stabilized and is now down only 2.2 percent down in the year, easing pressure on import costs.
Slowing inflation enabled the central bank to cut its key interest rate by 5 percentage points in the 12 months through July 2010. It resumed the rate reductions on May 13 and again on July 6, lowering the key rate to 12.5 percent.
“The Bank of Ghana will see this as a vindication of its earlier decision to cut rates,” Razia Khan, London-based head of research at Standard Chartered Bank Plc said of June inflation in an e-mailed note today. “We’re not so sure.”
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