In brief
- Following the unexpected rise in January 2024, Ghana’s annual CPI inflation retreated to its previous level with a 30bps decline to 23.2% in February 2024 (IC Insights: 23.9%). The drop in inflation was aided by moderation in price pressures for influential items in non-food inflation while food inflation experienced a much-broader decline, albeit mostly for less-influential items.
- Food inflation came in 10bps lower at 27.0% y/y while non-food inflation witnessed a faster decline of 50bps to 20.0% y/y, on the back of lower inflation for some heavily-weighted items such as Transport. In our view, the inflation for transport was mainly contained by the year-on-year decline in ex-pump prices as the subdued global energy prices dampened the impact of year-on-year FX adjustments.
- Although the drop in headline inflation came against our forecast uptick of 40bps in February 2024, we observe early indication of our anticipated non-linearity in the disinflation process for 2024. In our outlook report for FY2024 – Readying for Policy Pivot – we opined that inflation will continue its downturn in 2024, but with a non-linear trend as we foresaw bumps in the course of the year.
- In March 2023, the CPI level witnessed an unexpected decline to record a rare month-on-month deflation of 1.2%. However, we do not anticipate another decline in the CPI level for March 2024. Against the backdrop of unfavourable base effect, a 5.0% y/y increase in diesel prices, and potential pass-through of recent Cedi depreciation, we forecast a 280bps jump in the headline inflation to 26.0% y/y in March 2024.
- Our year-start MPC expectation was for a first rate cut in March 2024. However, we believe the authorities have already frontloaded our March expectation in the surprise cut in January 2024. Against this backdrop and amidst the elevated inflation profile in 1Q2024, we expect the MPC to leave the policy rate unchanged at 29.0% during the March 2024 meeting.
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