Inflation will inch up for the second month running by about 40 basis points to 23.9% in February 2024.

According to IC Research, it foresees upside risk to inflation over the next two months following taxes such as the emissions levy impacting the industrial and transport sectors in addition to higher excise duty on cider beer and imported plastic packaging.

“We thus project annual and monthly inflation rates at 23.9% year-on-year and 2.2% month-on-month in February 2024. This will further reduce the real policy rate and likely keep the March [2024] MPC rate decision on hold at 29.0%”, it pointed out.

Headline inflation surprised many analysts with an unexpected uptick of 30 basis points in January 2024 to 23.5% year-on-year. This was against IC Securities forecast decline of 22.4%.

“Against the odds of continued disinflation on the back of a strong start to the year by the Ghanaian Cedi, stable energy prices, and lagged impact of lower electricity tariff, the upturn in inflation is a twist of fate that potentially dampens market optimism”, it pointed out

The unexpected uptick in headline inflation bucks the trend of five consecutive months of decline in annual inflation. This IC Research said this raises the inflation profile to a higher level than previously envisaged in its model for first quarter of 2024.

The renewed price pressures were ignited by a 180 basis upsurge in non-food inflation to 20.5% year-on-year, which outweighed the 160 basis points decline in food inflation to 27.1% year-on-year.

On a month-on-month basis, headline inflation came in higher at 2.0% as both food and non-food inflation rates edged up to 1.6% (+30 basis points) and 2.4% (+140 basis points), respectively.

The heightened pressure in the monthly inflation rate, it added, dampens optimism about the pace of decline in annual inflation in the first half of 2024 amidst the new taxes introduced in the 2024 budget and expected pass-through of recent foreign exchange pressures.

“On a positive note, we observed lower year-on-year inflation rates for most of the sub-divisions of food items especially heavyweights such as ready-made food (26.0%), cereals (20.5%), and fish & other seafood (30.6%). However, inflation for vegetables & tubers quickened by 230 basis points to 35.8% year-on-year with the monthly rate surging 250 basis points to 3.0% month-on-month in January 2024. This raises a cautious outlook for food inflation ahead of the planting season between April to June 2024”, it mentioned.