Inflation has been a persistent concern for Ghanaians, with the national rate peaking at an alarming 54.1%
in December 2022, marking one of the highest inflationary periods in recent history.
Although inflation has since eased to 23% in November 2024, the situation remains dire when viewed
through a regional lens. In many parts of the country, inflation trends remain significantly higher than the
national average, highlighting the uneven impact of rising costs on different communities.
This disparity raises a critical question: even as inflation rates decline, will the average Ghanaian feel the
difference?
It’s a question that goes beyond the headlines and into the heart of everyday struggles—where prices for
essentials like food and rent often seem immune to economic recovery. For most people, the battle isn’t
just against inflation numbers but against the real-life burden of affordability.
When Inflation Falls, Prices Don’t Necessarily Drop
When economists talk about inflation going down, they often mean that prices are still rising, but at a slower
pace than before. For example, if inflation drops from 23% to 15%, it doesn’t mean prices have fallen—it
simply means they’re not increasing as quickly. So, if you’ve been paying more for food, rent, or
transportation over the past year, those prices are unlikely to suddenly go back to what they used to be.
They’ll just rise more slowly, which might not feel like much relief at all.
Why Inflation Persists Even When Rates Drop
There’s something called inflation persistence, which essentially means inflation has a habit of sticking
around. This happens because of deeply rooted factors in the economy. For example, once businesses
adjust their prices to account for higher costs, they’re often reluctant to lower them again. If a grocery store
raises the price of rice or cooking oil, it’s not going to slash those prices the moment inflation rates ease.
These prices tend to “stick,” making it hard for consumers to feel the benefits of lower inflation.
The Role of Sticky Prices
Another factor is what economists call “price stickiness.” It sounds technical, but it’s really simple.
Businesses are often slow to reduce their prices, even when the pressure to keep them high is gone. Think
about it: changing prices isn’t as easy as flipping a switch.
Stores have to update their systems, change labels, and inform customers. It costs money and effort, so
many businesses prefer to keep prices stable—even if it means they stay higher than necessary. And, of
course, some businesses worry that lowering prices might make their products look less valuable.
Why Essentials Hit Harder
Even if the overall inflation rate drops, essentials like food and rent are often slow to reflect that change. If
you’ve been spending most of your income on groceries, you’re still going to feel the pinch because food
prices don’t drop overnight. For people who spend a large part of their earnings on necessities, the relief
from lower inflation often feels like it’s taking forever to arrive.
The Psychology of Inflation
This brings us to the psychological side of inflation. When prices rise, people adjust their expectations.
Businesses anticipate higher costs and keep their prices high, while consumers start buying things faster,
worried prices will rise even more.
This creates a cycle that doesn’t break just because inflation starts to decline. Even if the numbers on the
news sound better, people’s behaviors and attitudes don’t change immediately, which slows down the
process of things getting cheaper or even stabilizing.
Policies Work Slowly on Essentials
The policies designed to fight inflation, like raising interest rates, can take months or even years to show
results. These policies often target the demand side of the economy—essentially trying to make people
spend less so prices don’t keep climbing.
But for things like food and rent, which are driven by supply issues, those policies don’t work as quickly. So,
while inflation might technically go down, the price of that bag of maize or gallon of petrol might not budge
much.
Wages vs Inflation: A Growing Gap
And then there’s the issue of wages. If your income hasn’t kept up with rising prices, even a slight dip in
inflation might not help much.
For instance, if inflation has eroded the value of your money over the past year, you’re still playing catch-
up, even if prices aren’t rising as quickly anymore. This gap between wages and prices means many
households will continue to feel financially strained.
The Real Measure of Relief
In reality, the true measure of relief for most people isn’t the inflation rate itself but whether their daily
expenses feel manageable. It’s whether food prices come down, rent becomes affordable, and
transportation costs don’t eat into their entire paycheck. For that to happen, it takes more than just a
decline in inflation rates.
There needs to be real action to address the deeper issues, like improving agricultural productivity,
reducing transportation costs, and stabilizing the currency.
So, even if inflation rates drop, the impact may not be felt immediately—or equally—by everyone. For the
average person, the journey from lower inflation rates to real relief in their pocket is often a long and
complicated one. What’s needed is not just lower inflation but solutions that make everyday life more
affordable. Until that happens, the numbers on the news will continue to feel disconnected from the realities
of daily life.
