In brief
- Ghana’s annual headline inflation declined by 70bps to 22.4% y/y in March 2025 compared to our in-house forecast of 23.3% and the market median expectation of 23.4%. This pegs annual inflation rate at the lowest level in four months and slightly dampens the renewed post-MPC concerns about a likely upturn in domestic yields.
- Food inflation gave us a pleasant surprise with a second straight disinflation at a stronger pace to 26.5% y/y (-160bps), suppressed by heavy-weight items such as vegetables & tubers, while Non-food inflation continued its declining momentum for the 5th straight month with a 10bps downtick to 18.7%. Despite the 10bps decline in non-food inflation, our estimates point to a likely unchanged services inflation in March 2025 after declining in February, although core inflation probably dropped below 22.0% in the month under review.
- The pace of disinflation will quicken in the months ahead as tighter monetary stance and tax reliefs take effect in April. We note that the cooling impact of the 100bps hike in the policy rate to 28.0% and the intensified liquidity mop-up is yet to be reflected in price dynamics. Additionally, Ghana’s President assented to the Bill to repeal the E-levy Act on 2nd April 2025, partly easing the tax regime with the potential for slower price increases. These complementary fiscal and monetary policy measures boost our optimism for a faster disinflation in the months ahead, especially with the May 2025 inflation print expected on 4th June 2025.
- We reiterate our view that the policy rate hike is unlikely to spur yield upturn. We opined in our March 2025 MPC Note that the ongoing fiscal squeeze will cap the Treasury’s borrowing need and avert renewed increase in yield from the policy rate hike. The latest decline in annual inflation has strengthened our view, albeit with stable yields expected over the next 3-months. Consequently, we maintain our expectation for a first policy rate cut in July 2025.
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