Inflation is expected to go up significantly to 26.0% in March 2024 before resuming its downward trajectory in April 2024.

According to GCB Capital (GCL), the Bank of Ghana’s decision to keep the policy rate unchanged at 29.0% is appropriate for signaling a continuously tight monetary policy stance that is required to anchor the disinflation process firmly.

“We expect inflation for March 2024 to print significantly higher (GCL outlook for March 2024 inflation: 26%) due to these risk factors and unfavourable base effects before resuming a decline from Apr 2024. Therefore, we believe the rate-neutral decision is appropriate for signalling a continuously tight monetary policy stance that is required to anchor the disinflation process firmly”.

“No surprises as the upside risks to inflation simmer: The decision aligns with our expectations and the consensus market forecast. While there was scope for a marginal rate cut, the current and emerging upside risks to the inflation outlook and expectations require a cautious policy stance”, it added.

Inflation surprisingly took a nose dive in February to 23.2%. However, GCB Capital said the recent depreciation of the cedi and other risk factors will push it upwards.

The cedi has shed about 8.0% in value to the dollar and is equally weak against other major trading currencies across the interbank and retail markets.

There is also the continuing uptick in crude oil prices largely from supply shocks due to Geopolitics and the Red Sea attacks on cargoes. Oil Marketing Companies have consequently increased the prices of petrol and diesel at the pumps which may trigger potential increases in transport fares and general prices.

“Thus, the anticipated pass-through of the currency pressure to inflation and the inflationary effects of the rising fuel costs and their combined implications for the quarterly utility tariff review pose upside risks to inflation in the near term. We expect inflation for March 2024 to print significantly higher (GCL outlook for Mar-24 inflation: 26%) due to these risk factors and unfavourable base effects before resuming a decline from April 2024. Therefore, we believe the rate-neutral decision is appropriate for signalling a continuously tight monetary policy stance that is required to anchor the disinflation process firmly”.