What is inflation?
Inflation is simply an increase in the level of prices (of goods and services in the country). A higher inflation means that you can buy less for your money. Most economists consider a normal level of inflation to be 2-3% per year.
Inflation can be measured in a variety of ways, but the method currently used by the Ghana Statistical Service is the Consumer Price Index (CPI).
Consumer Price Index (Ghana)
The Consumer Price Index (CPI) measures the change over time in the general price level of goods and services that households acquire for the purpose of consumption, with reference to "a" price level. The CPI includes items such as services, housing, electricity, food, and transportation.
So why bother about inflation?
If inflation is low, prices of food should go down, interest rates on loans should go down,the value of the Ghana Cedi should appreciate and subsequently prices of imports should go down. (Unfortunately this is mostly not the case)
Put in simple terms:
Lower Inflation = Cedi Appreciation to Foreign Currencies = Cheaper imports = Lower prices for goods and services
This leads to:
Lower interest rates = less expensive borrowing costs for industry and private individuals = more investments = more economic growth