The disinflation trend is expected to continue but at a moderated pace despite the depreciation of the cedi and expected petroleum price hikes.

According to GCB Capital, the near-term inflation profile now appears elevated, with the lagged impact of cedi depreciation, transport fare hike and the implementation of the second quarter 2024 utility tariff adjustment set to moderate the pace of disinflation in the second half of the year.

It pointed out that the continuous disinflation will be driven largely by favourable base drift, which should sustain the decline in year-on-year inflation.

“We expect the imminent main crop harvest season to boost disinflation from the food basket. The UN-backed cease-fire talk between Israel and Hamas shows a pathway to restoring peace, which, together with the US Fed's probable pushback on an immediate interest rate pivot, improves the outlook for crude oil supply”, it added.

Furthermore, it said that the imminent completion of the second review of Ghana's programme with the International Monetary Fund and the release of catalytic funding should also improve the foreign exchange reserve cushion and trigger a marginal correction, sustaining the disinflationary trend.

Inflation reached 26-month all-time low in May 2024

Ghana's Consumer Price Inflation eased again in May 2024, reaching a 26-month low of 23.1%.

This follows another base-induced decline in the overall and the food CPI year-on-year.

“While we expected the decline, the pace was slower than envisaged. The simmering price pressures from the passthrough of cedi depreciation, transport fare hikes, and seasonality effects on food prices, which we flagged in our last inflation update, had a more pronounced moderating effect, partly offsetting the impact of a favourable base drift”, GCB Capital stated.

This impact, it said, is reflected in the sharper increase in CPI in May 2024 to 220 points (+6.73 points from April, the third highest monthly increase under the current CPI series), moderating the anticipated pace of decline in headline inflation.

The food basket recorded a sharp disinflation in May despite the steep 6.2 points increase in the food CPI from April, coming in 4.2% lower at 22.6%.