Ghana Inflation at Six-Month Low Gives Room for Rates Pause

Ekow Dontoh and Moses Mozart Dzawu
·2 min read

(Bloomberg) -- Ghana’s inflation rate fell less than predicted to a six-month low in April, easing pressure on the central bank to further increase record high borrowing costs.

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Annual inflation cooled for a fourth consecutive month to 41.2% from 45% in March, Government Statistician Samuel Kobina Annim told reporters Wednesday in the capital, Accra. The median estimate of five economists in a Bloomberg survey was 39.8%.

The softening was aided by favorable base effects compared with a year ago when inflation hit an almost two-decade high and the relative stability in the cedi since January after a volatile year in 2022. The currency has steadied on expectations that a final deal with the International Monetary Fund for a $3 billion bailout is imminent for the debt-distressed nation.

Non-alcoholic beverages and food, including local produce, were the main drivers of April’s rate, Annim said. Meanwhile, prices for housing, water, energy and household items in the non-food category declined on yearly basis.

Food inflation eased to 48.7% last month from 50.8% in March and non-food price growth decelerated to 35.4% from 40.6%. Prices rose 2.4% in the month.

Bank of Ghana Governor Ernest Addison said last week that he’s optimistic inflation will continue to slow in coming months, based on measures implemented by the monetary policy committee. The MPC has raised the key interest rate by 16 percentage points since November 2021 to curb inflation and steady the currency’s decline against the dollar.

Addison said in March he expected the inflation rate to slow to 29% by the end of the year from 54.1% in December, a level last seen in the early 2000s. The central bank typically targets an inflation rate between 6% and 10%.

Expectations that price-growth will continue to slow will likely to prompt the central bank to keep borrowing costs unchanged when policymakers announce their next rate decision on May 22, Agyapomaa Gyeke-Dako, a senior lecturer in economics at the University of Ghana Business School, said by phone ahead of the release.

The Ghanaian cedi weakened 0.2% to 11.7369 against the dollar at 10:44 a.m. in the capital, Accra. The yield on Ghana’s dollar bonds maturing in 2032 rose 11 basis points to 25.3%.

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