Headline Inflation Projected to Rise to 21.8% in August Amid Adverse Base Effect
IC Securities has forecasted a resurgence in Ghana’s inflation rate, predicting it will rise to 21.8% in August 2024, driven by an adverse base effect.
This follows a sharper-than-expected decline to 20.9% in July 2024, marking the fourth consecutive month of disinflation and the most extended period of easing inflation since the second half of 2023.
The investment firm attributes the anticipated uptick to the atypical contraction in the Consumer Price Index (CPI) in August 2023, which saw a 0.4-point decrease, leading to a 300-basis-point drop in annual inflation.
Given this unconventional decline, even a slight increase in the CPI this August could push the annual inflation rate higher. Factors such as the spillover effects from the July 2024 utility tariff hike, though partly mitigated by a stable cedi, are expected to contribute to this inflationary pressure.
Despite the anticipated rise in annual inflation, month-on-month inflation is projected to ease to 0.5%, moderated by the seasonality of food harvests.
On the monetary policy front, IC Securities notes that the widening real interest rates could prompt a dovish shift in the Bank of Ghana’s stance, with potential rate cuts on the horizon.
However, the firm cautions that the central bank’s Monetary Policy Committee will need to balance these considerations against the Treasury’s substantial borrowing requirements and the ongoing adherence to International Monetary Fund targets, especially as election-related spending looms in the final quarter of the year.
