In brief
- Ghana’s disinflation momentum deepened in May 2025, with headline inflation dropping by 280bps to 18.4% y/y (the lowest since February 2022). This outpaced our 180bps forecast decline and marked a five-month cumulative decline of 540bps. The deceleration reflects a strong base effect, lower petroleum prices, and the favourable pass-through of the Ghanaian Cedi’s sharp appreciation, which began in April but materially influenced the May 2025 CPI due to overlapping timing in data collection.
- Food inflation fell by 220bps to 22.8% y/y in May 2025, driven by a strong base effect in the CPI for vegetable & tuber (−10.3pp to 24.0% y/y), although the ongoing planting season pushed vegetable inflation higher on a m/m basis to 2.4%. Additionally, non-food inflation plunged by 350bps to 14.4% y/y — the 7th straight monthly decline — led by a sharp drop of 11.8pp in transport inflation to 3.1% y/y, reflecting fuel price reversals from the Cedi appreciation. Goods and services inflation both declined, with goods inflation easing to 20.1% (−170bps) and services to 14.3% (−90bps). We believe the relatively lower services inflation (weighted 27.2%) poses minimal upside risk to headline inflation, while the upcoming crop harvest in 3Q2025 will further ease goods inflation.
- We anticipate another sharp disinflation in June 2025, driven by a strong FX pass-through and lower energy prices. Our estimates show a 29.5% m/m and a 35.3% y/y appreciation of the Ghanaian Cedi during the June CPI data window, easing the cost of imports, fuel and transport. The announced 15.0% reduction in transport fares by commercial transport operators will further suppress transport inflation and indirectly soften food prices, especially vegetables & tubers. As a result, we forecast a 240bps decline in headline inflation to 16.0% y/y in June, with the sequential rate at 0.8% m/m.
- We maintain our expectation for policy rate cut to resume at the July 2025 MPC meeting, supported by the sharp disinflation in May 2025, which lifted the ex-post real policy rate to 9.6%. Our inflation forecast for June points to an ex-ante real policy rate of between 11.0% and 12.0%, giving the BOG ample room to ease. With core inflation now above the headline rate — the first time since March 2024 — we think this will temper the MPC’s dovishness, limiting the cut to 200bps. Nonetheless, we acknowledge the elevated real policy rate as scope for a deeper rate cut.
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