Adnan Adams Mohammed
GCB Capital has predicted an end of year inflation of 17 percent amidst tightening of the monetary policy by the Bank of Ghana.
GCB Capital further predicts that May inflation will fall to 21% from April inflation of 25%.
It notes that, the predicted decline will be influenced largely due to base effects. However, there are significant concerns, among market players, about the potential impacts of the recent depreciation of the cedi and its delayed consequences on prices.
With GCB Capital worried over the “second-round effects”, such is seen as a significant risk to the short-term economic outlook noting that; “The recent rise in ex-pump petroleum prices, leading to increased transport fares, is expected to drive up general prices further.
“With quarterly utility tariff adjustments yet to be implemented and prevailing economic uncertainties, the risk of near-term inflation remains high.”
GCB Capital proffered that, such “situation necessitates a persistently tight monetary policy to manage inflation expectations and support the disinflation process.”
In line with its suggestion, the Monetary Policy Committee (MPC) last week maintained a tight monetary policy stance to counter emerging inflationary pressures from currency depreciation and transport fare increases.
The MPC’s latest forecasts indicate a slightly elevated inflation profile due to the cedi’s depreciation and recent transport fare hikes.
Adding that, achieving this target hinges on maintaining a strict monetary policy and implementing aggressive liquidity management operations.
Consequently, GCB Capital acknowledges the MPC’s decision to align with its expectations and the market view, noting that, the evident risks to inflation necessitate continued vigilance and policy strictness.
According to the central bank, inflation has significantly decreased from 41.2 percent in April 2023 to 25 percent in April 2024. This notable reduction in inflation is observed in both the food and non-food components.
The central bank attributes the decline in inflation to several factors: relative stability in the local currency, a tighter monetary policy stance, and stable petroleum prices.
Despite the sharp disinflation from April 2023 to April 2024, inflation remained sticky in the first quarter of the year, hovering around 23 percent with a slight increase in March.
The sluggish disinflation process can be explained by a reduced supply of some seasonal food items and exchange rate depreciation, particularly impacting non-food inflation.
