Consumer price Inflation fell again from 11.8 percent in December to 11.6 percent in January, on a year-on-year basis. Inflation moved up to 14.0 percent in February with the recent 50.0 percent increase in petroleum prices as part of the industry deregulation. The Consumer Price Index rose by 4.8 percent, compared with 0.9 percent in January 2005 and with 2.5 percent in February 2004. The non-food index increased by 6.8 percent compared with 1.9 percent in the same month last year.

During the last quarter of 2004 headline inflation eased from the 12.6 percent recorded in September to 11.8 percent at the end of December. The drop in inflation reflected a combination of improved food supply, a relatively stable exchange rate in conditions of diminishing inflationary pressures. The latest numbers mean that headline inflation now stands at half its December 2003 level of 23.6 percent and closer to the single-digit policy target.

A review of the latest economic data and information that has become available since the last MPC meeting suggests that inflationary pressures continued to be subdued, and the cedi exchange rate was relatively stable, underpinned by a significant improvement in the fiscal and external payments positions. Domestic demand and economic activity have also been strong and the prospect is for a higher GDP growth than initially forecast for 2004.

Available data indicates that economic activity continues to pick up and domestic demand is robust driven by strong external sector performance. The Bank of Ghana’s Composite Indicator of Economic Activity shows an increase of 4.5% in the second quarter of 2004, compared to 0.9 percent in the first quarter of 2004 and 6.1 percent in the second quarter of 2003. The Bank of Ghana Survey of Business Confidence also indicates that businesses continue to maintain a positive view of the economic outlook and expectations that are consistent with business plans and forecasts.