Notwithstanding the cedi’s decline and anticipated increases in petroleum prices, the trend of disinflation is predicted to continue, however slowly.
The depreciation of the cedi, increases in transportation costs, and the implementation of the 2024 utility tariff adjustment for the second quarter are expected to reduce the speed of disinflation in the second half of the year, according to GCB Capital, which indicates that the near-term inflation profile is currently elevated.
It said that favourable base drift, which should maintain the decrease in inflation year over year, will be the primary driver of the ongoing disinflation.
The depreciation of the cedi, increases in transportation costs, and the implementation of the 2024 utility tariff adjustment for the second quarter are expected to reduce the speed of disinflation in the second half of the year, according to GCB Capital, which indicates that the near-term inflation profile is currently elevated.
It said that favourable base drift, which should maintain the decrease in inflation year over year, will be the primary driver of the ongoing disinflation.
“We expect the imminent main crop harvest season to boost disinflation from the food basket. The UN-backed cease-fire talk between Israel and Hamas shows a pathway to restoring peace, which, together with the US Fed’s probable pushback on an immediate interest rate pivot, improves the outlook for crude oil supply”, it added.
Moreover, it stated that the impending conclusion of Ghana’s program’s second review with the IMF and the release of catalyst money should enhance the foreign exchange reserve cushion and cause a slight correction, maintaining the deflationary trend.
Moreover, it stated that the impending conclusion of Ghana’s program’s second review with the IMF and the release of catalyst money should enhance the foreign exchange reserve cushion and cause a slight correction, maintaining the deflationary trend.
Inflation reached 26-month all-time low in May 2024
Ghana’s Consumer Price Inflation eased again in May 2024, reaching a 26-month low of 23.1%.
This follows another base-induced decline in the overall and the food CPI year-on-year.
“While we expected the decline, the pace was slower than envisaged. The simmering price pressures from the passthrough of cedi depreciation, transport fare hikes, and seasonality effects on food prices, which we flagged in our last inflation update, had a more pronounced moderating effect, partly offsetting the impact of a favourable base drift”, GCB Capital stated.
The stronger CPI increase in May 2024 to 220 points (+6.73 points from April), the third-highest monthly increase under the current CPI series, it said, reflects this impact and moderates the expected pace of decrease in headline inflation.
The food basket recorded a sharp disinflation in May despite the steep 6.2 points increase in the food CPI from April, coming in 4.2% lower at 22.6%.