Ghana’s Inflation Eases to 22.4% in March, But Economic Strain Persists

Summary: Ghana’s annual consumer inflation rate declined to 22.4% in March 2025, marking the third consecutive month of easing, primarily due to a significant decrease in food prices. Despite this downward trend, the inflation rate remains well above the Bank of Ghana’s target range of 6-10%, indicating persistent economic challenges. As reported by Accra Street Journal, while the reduction in inflation offers a glimmer of hope, the high cost of living continues to exert pressure on households and businesses, underscoring the need for sustained economic reforms and fiscal discipline to achieve long-term stability

Detailed: Ghana‘s underlying inflation pressures continued to ease into the first quarter of 2025, offering tentative relief for policymakers grappling with price instability. According to the Bank of Ghana‘s March 2025 Economic and Financial Data, Core 4 inflation, which excludes energy, utilities, and all food items to provide a cleaner measure of persistent inflation trends, fell to 15.8% in February, down from 21.8% a year earlier. This decline suggests that the forces driving inflation are beginning to weaken, a necessary condition for durable price stability. Other core measures also softened, with Core 1 inflation, which strips out energy and utilities but includes food, dropping to 22.4% in February 2025 from a peak of 26.3% in March 2024, reflecting broader momentum in slowing price growth across essential categories.

The moderation in core inflation is mirrored by headline consumer inflation, which fell to 23.1% in March 2025. Both food and non-food inflation contributed to the decline, with food inflation easing to 28.1% in February, while non-food inflation dropped to 18.8%.

These trends indicate that price pressures are cooling across the wider economy, not just within specific sectors. However, inflation levels remain high by historical standards, highlighting that while progress has been made, the cost of living remains significantly elevated for households and businesses.

The recent slow pace of rise in prices has been supported by several factors, including a relatively stable exchange rate, tighter monetary policy, with the Bank of Ghana hiking its policy rate by a 1% increase from 27% to 28%, and fiscal measures such as the repeal of the E-Levy Act. Together, these actions, though criticised due to some overlooked effects, have helped to maintain some  soundness in prices.

Despite the recent improvements, Ghana remains at risk of missing its inflation targets according to some think tanks. The International Monetary Fund (IMF) projects that year-end inflation could reach around 17.5%, well above the government‘s 11.9% target for 2025. This gap has serious implications for monetary policy credibility, consumer purchasing power, and investor confidence, as sustained inflation above target can entrench higher inflation expectations and weaken the disinflation process.

Moreover, regional disparities reveal that the burden of inflation is not evenly distributed across the country. These variations suggest that national averages may mask localized cost-of-living crises, which could complicate the design and effectiveness of policy responses intended to address price stability.

While the continued decline in core inflation offers an encouraging signal that underlying price dynamics are improving, Ghana’s path to full price stability remains fragile. The risks from volatile food prices, external shocks, and structural inefficiencies mean that inflation could prove stubborn without sustained, coordinated policy action on both the demand and supply sides of the economy.

Last Updated on April 27, 2025 by samboad