Emergence of Risks Poses Dangers to the Inflation Outlook

The pace of increase in the consumer price index widened further in May, pushing the headline inflation rate to record its second consecutive increase in what appears to be a seeming reversal of the disinflationary path that has persisted since the start of last year. According to recent data released by Ghana’s statistical office, the inflation rate rose from 3.4% last month to print at 3.7% in May, having reached a trough in March 2026 at 3.2%, the lowest in recent history. The renewed upward pressures on the price of consumer goods and services are coming on the heels of the passthrough effect of the ongoing Middle East crisis, with its attendant effect of a spike in the prices of crude oil on the international market.

On the domestic front, the rise in geopolitical tensions in the Middle East has resulted in increases in ex-pump fuel prices amid a rise in Ghana’s import bill, thus culminating in a steady decline in the value of the local currency. This is corroborated by the central bank, as it noted in its May monetary policy release that its latest forecast suggested that inflation is expected to trend upward into the medium-term target band of 8.0%±2.0% largely due to base drift effects related to exchange rate movements, food supply conditions, and transport fares. The pressures on consumer prices were also observed in the monthly inflation reading, as inflation in May was recorded at 1.1%, an additional increase over April’s 1.0% inflation mark.

Food inflation was a key contributor to the jump in May’s headline inflation reading, having recorded a significant increase from 2.2% in April to 3.3% in May, with nine out of the top ten high inflation items being food items. Some food items that recorded substantially higher inflation numbers included Ginger (78.0%), Mango (61.9%), and Plantain (47.6%). Month-on-month food inflation saw a significant appreciation in the prices of most food items, as food inflation in May came in at 2.0%, compared to 0.8% in the previous month. The substantial jump was led by Live animals, Cereal products, and Dairy products & eggs with inflation rates of 3.1%, 3.1%, and 0.5%, respectively.

The non-food inflation basket, on the other hand, saw declines in its annual and monthly readings, edging down from 4.2% and 1.1% in April to 4.1% and 0.4% in May, respectively. Transport with a weight of 10.5%, persisted in its deflationary path, although appearing to lose steam over the past three months, having risen from a low of -7.5% in February to print at -2.8% in May. It was among seven other items out of the observed twelve non-food items that recorded rates below the group’s annual inflation mark.

Across the regions, the inflation rate hovered between -3.0% in the Savannah region and 10.1% in the North East region, whilst eight regions recorded inflation rates above the national average. Inflation on both local and imported items underwent increases from 4.7% and 0.5% in April to 5.0% and 0.9% in May, respectively. Similarly, for the goods and services categorization, inflation climbed up to 1.4% and 9.9% from 1.1% and 9.6% between April and May, respectively.

The May sitting of the central bank’s monetary policy committee was the committee adopt a wait-and-see approach after it recognized the prevalence of upside risks to the inflation outlook emanating from the protracted Middle East crisis, which could keep crude oil prices above USD 100 per barrel and raise the prospect of petroleum price pass-through into domestic transport and utility costs.