In brief
- A stronger-than-expected pass-through of Cedi appreciation fuels inflation dive. Ghana’s June 2025 inflation plunged to 13.7% y/y (vs. 18.4% prior), beating our 16.0% expectation and marking the lowest level since December 2021 as favourable exchange rate pass-through calmed price pressures. The surprise 470bps drop largely resets inflation to pre-crisis territory, paving the way for a deep cut in the policy rate in July and the Treasury’s return to bond issuance in late-3Q2025. The disinflation was broad-based across food (16.3% y/y | -650bps) and non-food (11.4% y/y | -300bps) with core inflation (8.3% y/y) dropping to single digit for the first time since October 2021.
- We trim our end-2025 inflation forecast, but fuel levy and electricity tariff risks linger. On the back of the stronger pass-through of Cedi appreciation, a steeper-than-expected June disinflation and anticipated strong crop harvest in 3Q2025, we revise our end-2025 inflation forecast range to 10.3% – 12.3% (midpoint: 11.3%), down from 11.8% – 13.8%. We see scope for further disinflation on the back of favourable base effect in 4Q2025, raising the possibility of single-digit inflation by year-end. However, we opt to stay cautious due to potential risk from major electricity tariff hike in 4Q2025 and expected start of the suspended GHS 1.0/litre fuel levy on 16 July 2025.
- We raise our expected cut in the policy rate to at least 300bps, with a cautious eye on tariff risk and continued FX stability. We now expect the Bank of Ghana to cut the policy rate by at least 300bps at the July 2025 MPC meeting, up from our earlier call for at least 200bps cut, as a sharp rise in the real policy rate to 14.3% and core inflation back in single digits boost our dovish sentiment.
- Disinflation sets the stage for Treasury bond comeback. We expect the sharp decline in inflation to provide a catalyst for bond market rally and drag secondary market yields to the mid-teens, paving the way for a Treasury domestic bond issuance by late-3Q2025. With our estimated modified duration of 3.6 – 4.6 for the 2031 – 2038 tenors, we expect greater price sensitivity and rally across this maturity spectrum, making them prime candidates for potential re-opening offers.
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