Ghana’s inflation slows to 22.8% in June 2024

Ghana’s inflation rate has decreased to 22.8 per cent in June this year, marking the third consecutive month of slowdown since April. Kweku Arkoh-Koomson, Economic Analyst at Databank, recently joined CNBC Africa to dissect the numbers and discuss the potential next steps of the Bank of Ghana's Monetary Policy Committee (MPC). When examining the recent inflation trends, Arkoh-Koomson highlighted the importance of not jumping to conclusions too soon. While the decline in inflation rates is a positive sign for consumer demand and business support, he cautioned against premature celebration, citing past instances where similar downward trends were followed by upswings in inflation. One of the key drivers of inflation remains food prices, specifically vegetables, tubers, fruits, and nuts. The second quarter in Ghana typically experiences seasonal effects that lead to a surge in food prices, contributing to the uptick in food inflation. On the non-food side, Arkoh-Koomson noted a drop in inflation rates, attributing it to pullbacks from previous government taxes on areas such as housing and electricity. Looking ahead to the upcoming MPC meeting scheduled between the 23rd and 26th of this month, there is speculation about a potential shift from the current hold stance towards a rate cut. However, Arkoh-Koomson expressed a more conservative view, suggesting that the central bank may maintain its policy rates, considering factors like the recent depreciation of the CD and the need to wait out potential stormy economic conditions. Regarding Ghana's currency stability, Arkoh-Koomson shared a mix of optimism and caution. While the influx of IMF inflows has provided a temporary boost, questions linger about the sustainability of these measures in stabilizing the CD further. With a significant gap in local exports and ongoing debt negotiations, the outlook for the CD's performance in the second half of the year appears to hinge on effective liquidity management. In terms of the fair value of the Ghana CD against the dollar, Arkoh-Koomson indicated a range between mid-$15 to $16, emphasizing the need for continued monitoring of market developments and information dissemination. As discussions touched on Ghana receiving confirmation from the official creditors committee regarding the comparability of treatment principle, it became evident that the country's economic landscape is subject to various internal and external forces that will shape its trajectory in the coming months.