Ghana's inflation rate jumped to 9.08 percent in January, the first increase in 19 months and due partly to a 30 percent rise in petrol prices, but analysts still expect the central bank to keep interest rates on hold next week.
The rise in inflation from 8.58 percent in December came after President John Atta Mills' government introduced an unpopular 30 percent rise in petrol and diesel prices last month to keep pace with rising crude oil prices and to pay back public debts.
Inflation in Ghana, the world's second-largest cocoa producer and Africa's No. 2 gold miner, is set to reach double digits in coming months due to the fuel price hike, together with a recent weakening of the cedi currency and impending oil export revenues, analysts say.
The fuel price will continue to impact on prices, Ebo Duncan of the national statistics office told a news conference.
Non-food items, including fuel, rose during January at an annualised rate of 11.83 percent, while food items rose just 4.84 percent, data showed on Wednesday.
Non-food items account for just over half of the overall consumer price index. They include transport costs, which surged 19.42 percent on the year, and utlity costs, which were up 14.79 percent in January.
I am certain that inflation will increase to double digits in the near term if upward utility and petroleum price expectations persist, Sampson Akligoh of Accra-based Databank Financial Services said.
The Bank of Ghana has kept its key policy rate on hold since last July after cutting it by a cumulative 500 basis points since November 2009 after inflation peaked at nearly 21 percent.
Lisa Lewin of London-based Business Monitor International expects the Bank of Ghana to keep its policy rate on hold at 13.5 percent next week, avoiding a hike that would saddle the economy with higher credit costs.
Looking ahead to April, though, a rate hike is a distinct possibility, she added.
Ghana began producing oil last month, at its offshore Jubilee field, and says oil production will help its economy grow 12.3 percent this year, one of the fastest growth rates in Africa. The government plans to increase spending by 14 percent, according to its 2011 budget.
A strong cedi helped bring down inflation last year.
The currency has weakened since late last year, hitting a record low against the dollar this month.
The central bank was quoted last week as saying it was not worried about the currency's weakness, viewing it would counter the risk that oil exports will push the currency up to a point where cocoa and other exports become too expensive. This week, however, it intervened to support the cedi.