In brief
- Ghana’s headline inflation eased by 120 basis points to 21.2% year-on-year in April 2025, outpacing our expectations of a 70bps decline. This marks the fourth straight monthly drop and the lowest level since September 2024. The cumulative 260bps decline from January to April signals a notable shift in inflation dynamics, contrasting sharply with the 190bps increase recorded over the same period in 2024. This suggests that price pressures are easing more decisively and reinforces our optimism about Ghana’s disinflation path.
- Food inflation fell for a third consecutive month, dropping by 150bps to 25.0% y/y in April 2025 and marking a notable surprise given Ghana’s seasonal planting pressures. However, the upsurge in m/m inflation for vegetable to 1.5% from a deflation of 1.2% suggests caution amid the ongoing planting season. Non-food inflation continued its steady descent, falling 80bps to 17.9% y/y and representing its lowest level in three years. For services inflation, our estimation suggests a more modest decline compared to the drop in the headline rate. However, the renewed decline in services inflation in April 2025 from a likely unchanged level in March 2025 strengthens our optimism that Ghana’s CPI inflation dynamics is moving from blaze to breeze, although the breeze is yet to get cooler.
- We expect further decline in headline inflation for May 2025, although the start of higher utility tariff will be a slight dampener. Our inflation forecast suggests a further decline in the annual inflation rate to 19.4% (-180bps) in May 2025 while the sequential rate surges to 1.6% m/m. We expect favourable base effect, the Cedi’s strong appreciation, lower energy prices and the prevailing tight policy stance to quicken the disinflation in May.
- The intensifying disinflation bodes well for the policy stance as the real policy rate has widened to 6.8% and is sufficiently tight to anchor the disinflation process, in our view. However, we believe the May 2025 MPC meeting comes too soon to consider the start of rate easing. We thus expect a “Hold” decision at the May MPC meeting. We also expect the re-anchoring of inflation expectations to ease investor preference for FX hedging.
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