IC Research has disclosed in its assessment of the December 2024 inflation update, " Beyond the bullseye, " that the recent inflation pressures appear structural and require complementary fiscal policy.

“While we await the 2025 fiscal plan with expected softening of tax burden to ease the price buildup in second-half of 2025, we foresee the potential for monetary tightening to rein-in the demand-side pressure”.

It pointed out that the Bank of Ghana will be compelled to hike the monetary policy rate in its first meeting for 2025.

“As part of the possible remedial measures, we think the Bank of Ghana will be inclined to hike the policy rate at its first Monetary Policy Committee meeting in January 2025”.

Given the latest uptick in annual inflation, IC Research said Ghana’s real policy rate has further softened to 3.2%, requiring further hikes in the nominal policy rate to restore a sufficiently restrictive monetary stance.

“We think the authorities may require a real policy rate of between 5.0% and 7.0% to tighten monetary conditions and restore disinflation in the ensuing months. Against this backdrop, we envisage up to 200bps rate hike at the January 2025 MPC meeting”, it added.

Headline inflation closes 2025 higher

Headline inflation came in higher than expected for December 2024, closing the year with a feeling of anti-climax as the late year upturn completely eroded the downturn in the second quarter of 2024.

Annual inflation went up 80 basis points s to 23.8% in December 2024, exceeding the authorities’ 22.0% target upper outer band under the IMF programme by 180 basis points.

Food inflation continued to heat up, accelerating by 190 basis points to 27.8% year-on-year and sustaining the general price pressure in the final months of 2024.

Non-food inflation declined for the second consecutive month to 20.3% year-on-year in December 2024, ostensibly suppressed by the favourable pass-through of the strong Cedi appreciation.