In May 2024, inflation is projected to decrease to a level of 21% and is anticipated to conclude the year at approximately 17%.
GCB Capital attributes this to base effects.
Nevertheless, it voiced apprehension regarding the expected transmission of the ongoing depreciation of the cedi and its delayed repercussions, stating, “The secondary effects continue to pose an upward risk to the short-term forecast.”
“We have also seen the multiple upward adjustments in ex-pump petroleum prices, which result in transport fare hikes, and its full pass-through to general prices is yet to come. With the quarterly utility tariff adjustment still to come amidst the general macroeconomic uncertainties, the risk of near-term inflation is quite pronounced, requiring a continuously tight monetary policy stance to anchor inflation expectations and the disinflation process”.
In April 2024, inflation declined to 25.0% from 25.8% in March 2024.
Consequently, the Monetary Policy Committee (MPC) upheld an appropriately stringent monetary policy stance in light of the emerging upward risks to inflation stemming from currency pressures, recent increases in transportation fares, and their potential delayed impact on inflation.
The Committee noted that its latest projections indicate a somewhat elevated inflation trajectory, attributed to the recent series of cedi depreciations and hikes in transportation fares.
However, it anticipates the disinflationary trend to persist overall, forecasting headline inflation to fall within the monetary policy consultative range of 13% to 17% by the end of 2024. This projection hinges on maintaining the rigorous monetary policy stance, which includes assertive liquidity management measures.
GCB Capital concluded that “The decision is consistent with our expectations and the consensus market view as the upside risks to inflation are evident”.