GCB Capital expects a sharp increase in headline inflation in March 2024 to around 26%.

This is largely due to unfavourable base drifts, following the contraction in the Consumer Price Index February 2024.

However, this increase it said is transitory, and therefore expect the disinflation trend to resume from April 2024, driven largely by base effects, which should fairly anchor inflation expectations.

“We, however, flag the simmering cedi depreciation amidst immediate liquidity concerns and its potential pass through to ex-pump fuel prices in the wake of the lingering crude oil supply concerns due to geopolitics as an immediate upside risk to inflation through the transport channel and general market prices. We also reiterate the upside risk to inflation from potential fiscal overruns in the run-up to the 2024 election, which could reignite demand-driven price pressures in second half of 2024”.

It maintained its end-year 2024 inflation forecast at 16.5% ±1%.

Monetary Policy Rate to remain same

GCB Capital also predicted a cautious approach by the Monetary Policy Committee of the Bank of Ghana, saying, “We expect the Monetary Policy Committee (MPC) at its March 2024 monetary policy meeting to hold the policy rate at 29% to effectively steer inflation downward, deferring the next rate action to the May 2024 monetary policy window”.

It pointed out that given the anticipated increase in inflation for March 2024 is transitory and the Bank of Ghana expects inflation within the range of 13% to 17% by the end of 2024, another marginal rate cut in support of the depressed growth conditions will not be a surprise.

“However, we tilt towards a rate-neutral decision at the March 24 meeting”, it added.

February 2024 inflation slows down

Inflation slowed down to 23.2% in February 2024, beating most analysts forecast.

According to data from the Ghana Statistical Service, the non-food inflation went down to 20.0% in February 2024 from 20.5% in January 2024.

Food inflation however shot up marginally to 27.1% in February 2024 from 27.0% in January 2024.