Ghana inflation ticks higher in Oct, still on target

ACCRA  - Annual inflation in Ghana edged higher to 8.56 percent in October, the national statistics office said on Wednesday, adding the West African nation was still on track to keep price growth in single digits for the rest of the year.

The modest rise from September's figure of 8.40 percent was seen allowing the Bank of Ghana to keep the prime rate on hold when it meets next month, although mounting price pressures could prompt a monetary tightening early 2012.

The Bank of Ghana kept its prime lending rate unchanged at 12.50 percent in October, saying at the time it expected its end-of-year target of nine percent inflation to be maintained.

"The target is achievable as the bank continues to implement policies towards its target," government statistician Grace Bediako told a news briefing.

"However, there are some external factors that are out of the control of the bank and could pose a challenge to the target."

Analysts say a rise in spending before a presidential election next year could add to inflationary pressures, while the cedi currency has fallen to all-time lows as risk-averse investors pull out of frontier markets in Africa and elsewhere.

"Cedi weakness, rising producer prices and growing fears over the government's fiscal discipline could increase the chance of a rate hike early next year as inflation ticks higher," said Nalini Cundapen at Societe Generale.

Bediako said non-food items, led by transport, rose 11.32 percent, while food inflation stood at 4.03 percent. Ghana is just coming out of its harvest season, which tends to keep a temporary lid on food inflation.

"What we are seeing in Ghana in terms of price stability is pretty much unprecedented in the recent past. One wonders though, how long the good news will last," said Razia Khan at Standard Chartered, also noting the likelihood of higher spending pressures next year.

President John Atta Mills will seek re-election in December 2012, when he is expected to face 2008 rival and main opposition candidate Nana Akufo Addo.

Ghana is still putting the finishing touches to its 2012 budget. Finance Minister Kwabena Duffuor told Reuters this month he expected the fiscal deficit to narrow next year from the 5.1 percent of national output targeted for 2011.

December 2010's start of commercial oil production is due to lift Ghana's economic growth to close to 14 percent this year, one of the fastest rates in the world, before it eases to around eight percent in 2012.

British oil form Tullow Plc, operator of Ghana's Jubilee offshore field, revised down its forecast for average 2011 production to 79-81,000 barrels a day from 82,000-84,000 bpd, citing mechanical issues with wells in Jubilee.

It also said it would now only reach production of 120,000 bpd "sometime during 2012", a delay on its earlier indication that the level would be achieved at the end of this year.

Source: Reuters