In brief
- Base effect drags inflation to the floor. Ghana’s headline inflation declined for the 11th straight month by 170bps to 6.3% y/y in November 2025, a tad below our forecast of 6.5%. A broad-based easing across food, non-food, goods, services, imported and locally produced items drove a clean convergence around the 6.0% mark, effectively touching the lower bound of the BOG’s target. We view the sharp moderation as partly reflecting favourable base effect after last year’s CPI surge from disappointing crop harvest is now replaced by a stronger 2025 output. We believe this alignment across inflation categories signals materially softer underlying pressures and firmly anchored expectations heading into year-end.
- The MPC will have scope for a modest cut in the policy rate in January 2026 as utility tariff risk is offset by a softer VAT. Our forecast inflation of 5.3% for December 2025 implies a real policy rate of 12.7% by the January 2026 MPC meeting. The announced utility tariff increase (9.9% for electricity and 15.9% for water) came in below our expectation for a typical multi-year tariff order, easing near-term inflation risk. Also, we estimate that the VAT reforms in the 2026 budget will reduce cost of sales by 4.2% for VAT-registered businesses (other things being equal), further anchoring inflation. Collectively, we believe these developments will keep inflation within the Bank of Ghana’s target in 2026 and pave the way for a moderate cut in the policy rate in January 2026.
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