GCB Capital Predicts Marginal Policy Rate Cut in July Amid Persistent Inflation Concerns
GCB Capital indicates a remote possibility of a marginal policy rate cut by the Bank of Ghana in July, with more significant policy adjustments anticipated in September and November.
Despite these expected cuts, nominal interest rates are projected to remain stubbornly high due to the uncertain near-term outlook.
The investment firm anticipates that the Bank of Ghana will maintain a cautious policy stance given the anticipated deceleration in disinflation.
However, GCB Capital warns that increased liquidity from election-related spending could exacerbate inflationary pressures.
For the second half of 2024, GCB Capital projects a continued disinflation trend, albeit with inflation levels remaining elevated.
Ongoing upward pressures are expected to temper the decline in inflation, with potential reversals anticipated in August and the fourth quarter.
The Cedi has broadly stabilized against major trading currencies, buoyed by positive news since June. However, the lagged impact and second-round effects of prevailing inflationary pressures may persist, slowing the pace of disinflation.
GCB Capital suggests that inflation could struggle to dip below 20% even if exchange rate pressures remain subdued in the latter half of 2024.
A key risk flagged by GCB Capital is the potential for increased election-related expenditure ahead of the December 2024 general elections.
This could lead to higher Ghana Cedi liquidity, driving demand-side inflationary pressures if not effectively managed.
Inflation declines marginally to 22.8% in June
Inflation in Ghana marginally decreased to 22.8% in June, down from 23.1% in May, according to the Ghana Statistical Service.
This marks a decline of 0.3 percentage points and represents the second-lowest inflation rate recorded over the past seven months.
Food inflation surged to 24.0%, while non-food inflation dropped to 21.6%.
Inflation for imported goods stood at 17.5%, a figure attributed to ongoing exchange rate challenges.
Several sectors experienced inflation rates surpassing the national average of 22.8%.
Alcoholic Beverages, Tobacco, and Narcotics saw a significant rise to 32.3%, while Restaurants and Accommodation Services increased to 30.7%.
Housing, Water, and Electricity recorded an inflation rate of 26%, with Food and Non-Alcoholic Beverages at 24%.
Regionally, the Upper East Region reported the highest inflation rate at 35.2%, whereas the Oti Region had the lowest at 12.5%.
This regional disparity underscores the varied economic pressures across different parts of the country.
