In its latest report, IC Research predicts a decline in inflation to 22.4% in January 2024 from the December 2023 figure of 23.4%.
The research firm attributes this anticipated decrease to improved foreign exchange outcomes in late December 2023 and early January 2024, which are expected to mitigate upward price pressures.
“Our forecast shows a modest decline in the annual inflation rate to 22.4% y/y in January 2024 as the improved FX outturn in late December 2023 into early January 2024 sustains the lid on price pressures”.
The report notes that domestic energy prices exhibited stability with a downward bias during the January 2024 Consumer Price Index window compared to the same period in 2023.
Additionally, IC Research expects the lagged impact of the recently implemented lower electricity tariff to contribute to the disinflation trend in January 2024.
However, the report cautions that the introduction of Value Added Tax (VAT) on residential electricity usage above the lifeline threshold (>30kWh) from January 1, 2024, coupled with new taxes outlined in the 2024 budget, may weaken the pace of disinflation in early 2024.
This, in turn, could make the Bank of Ghana exercise caution in deciding when to initiate cuts in the policy rate.
The report highlights a significant drop in headline inflation to 23.2% in December 2023, marking a 320 basis points decrease.
This outcome surpassed market expectations and the 25.4% outer band of the lower limit specified in the International Monetary Fund (IMF) program target.
The report acknowledges that the end-2023 annual inflation rate significantly outperformed projections, experiencing a cumulative decline of 30.9 percentage points within a 12-month cycle, following its peak at 54.1% in December 2022.