The fall in inflation to single digit in November 2020 may compel the government to drive down interest rates soon.
According to sentiments by many market analysts, time is ripe for interest rates to trickle down.
Inflation fell to 9.8% last month, indicating, price increment comparative to same period last year was slower. This is within the Bank of Ghana’s target of 10+/-2%.
And the reduction in general price levels of goods and services over a period may reinforce the government’s desire to push interest rates down.
This is part of measures to reduce the domestic cost of borrowing in the midst of financing needs triggered by the coronavirus pandemic.
The move could also help reduce cost of credit though marginally. Presently average lending rate is about 21.5%.
Presently, Treasury bills hover around 14.10%, but the declining inflation is necessary for government to push treasury yields down to reduce the country’s debt service burden beyond the 50% of government revenue next year.
Analysts also expect yield on Treasury bills to fall in the short-term though there are still some level of risks to inflation in December 2020, as a result of increased spending due to the Christmas festivity.
Inflation hits 9.8% in November 2020
Inflation went down to 9.8% in November 2020, the lowest rate since the covid-19 pandemic started impacting prices, the Ghana Statistical Service (GSS) said.
Inflation had stayed in single digit for three consecutive months prior to the lockdown in April 2020. However, panic-buying ahead of the lockdown announcement shot up prices of goods and services, pushing inflation above 10%.
According to the GSS, food inflation declined to 11.7% compared with 12.6% the previous month.
Non-food inflation, on the other hand, remained constant at 8.3% registered in October 2020
Inflation for locally produced items was 11.5%, while that of imported items was 5.6% for November 2020.
Source:Fiilafmonline/JoyBuss
