The Chief Executive officer (CEO) of First National Bank Ghana, Dominic Adu, has said year-on-year inflation rate in the country is expected to rise in the short-term with the recent hikes in petroleum prices.

He said it was inevitable that the fuel price increases would have severe impact on both food and non-food inflation in the Consumer Price Index (CPI) basket.

“The March fuel price increase will have a severe impact on spending patterns, even on food, as consumers spend less and move to cheaper alternatives. Additionally, developments in Central Europe will also have a major impact on the prices of some major commodities as both Russia and Ukraine are big exporters of these commodities. This will put pressure on local prices,” said Mr Adu in his analysis of the inflation situation in the country.

He said First National Bank Ghana anticipated an upward trend in the  CPI and food inflation in the short-term, indicating that “Fuel price remains the main driver of higher costs going forward.’’

“The latest forecast shows that inflation would likely remain above target in the near-term, driven by both external and domestic factors, and only return to the target band in about four quarters ahead. The key risks to the inflation outlook include rising crude oil prices and its transmission to ex-pump petroleum prices and transportation costs, rising global inflation, food price uncertainties, and the fiscal outlook,” MrAdu said.

The Monetary Policy Committee of the Bank of Ghana maintained the policy rate at 14.5 percent in January 2022 in an attempt to stem the rising inflation.

Ghana’s inflation rate for February reached 15.7 per cent, the highest in six years, figures released by the Ghana Statistical Service (GSS) on Wednesday, indicated.

GSS attributed the rise in inflation to rising prices in utilities (water and electricity) and transportation.

The contribution of housing, electricity and gas to overall inflation increased by 4.6 percentage points from 17.5 per cent recorded in December 2021 to 22.1 per cent in January 2022.

The CEO of First National Bank Ghana said the latest development in Ghana’s inflation was likely to pressure the Bank of Ghana to review its policy rate upwards in the coming months.

“In the 2022 budget, the government used $60 per barrel for the projection of its revenue, but as at now the crude oil price on the international market is hovering around $120 per barrel, which means our oil revenues would double going forward, so the government could use the windfall profit to cushion other sectors of the economy,” Mr Adu said.