Inflation is expected to decline to 22.4% in January 2024 from 23.4% in December 2023, IC Research has predicted in its latest report.

According to the research firm, improved foreign exchange outturn in late December 2023 into early January 2024 would sustain the lid on 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”.

Additionally, domestic energy prices remained stable with downward bias during the January 2024 Consumer Price Index window relative to the same period in 2023.

IC Research also anticipates the lagged impact of the lower electricity tariff implemented last month to sustain the disinflation in January 2024.

“We also anticipate the lagged impact of the lower electricity tariff implemented last month to sustain the disinflation in January 2024. However, the authorities have signalled the introduction of VAT [Value Added Tax] on residential use of electricity above lifeline consumers (>30kWh) with effect from January 1, 2024”.

It continued that this, together with the new taxes in the 2024 budget, will weaken the pace of disinflation in early 2024 and keep the Bank of Ghana cautious on the timing of anticipated start to cuts in the policy rate.

Headline inflation nosedived to 23.2% in December 2023

Headline inflation nosedived 320 basis points to 23.2% in December 2023.

The end-2023 annual inflation outturn roundly outperformed expectations, beating both the market consensus and the 25.4% outer band of the lower limit in the International Monetary Fund (IMF) programme target.

Having peaked at 54.1% in December 2022, the latest annual inflation print of 23.2% in December 2023 translates into a cumulative decline of 30.9 percentage points within a 12-month cycle and clouds the early-2023 stickiness.