It is anticipated by IC Securities that in August 2024, inflation might reach 21.8%.
The investing firm claims that this is because of the unfavorable base impact.
On the other hand, monthly inflation will decrease.
“Although the sharper-than-expected deceleration in the July 2024 annual inflation significantly eases our concerns, we remain convinced that the August print will witness an upturn, stressing the need for caution in lower inflation and interest rate outlooks”, it disclosed in its analysis of the outlook of inflation.
It noticed that unexpectedly, in August 2023, the Consumer Price Index (CPI) levels contracted by 0.4 points, resulting in a 300 basis point decline in annual inflation because of this, it anticipates an increase in the CPI level for August 2024, albeit a moderate gain limited by the food harvest, given the unusual nature of a CPI contraction in August.
“We opine that even a slight increase in the August 2024 CPI will nudge annual inflation. Additionally, we foresee upside risk from the spillover effect of the utility tariff hike in July 2024 although the relatively stable Cedi could partly numb the impact. Consequently, we forecast annual inflation at 21.8% (+90bps) while the m/m [month-on-month] rate declines to 0.5% in August 2024”.
In July 2024, Ghana’s headline inflation unexpectedly dropped by 190 basis points, or a higher rate of fall, to 20.9%. It was the longest period of disinflation since the second half of 2023 and the fourth consecutive month that annual inflation has declined.
Policy rate cut in offing: – According to IC Securities, rate cuts are possible given the broader real interest rate, but the necessity for Treasury borrowing and the general level of prudence will keep the dovish mindset in check.
“The inflation outlook remains highly cautious amidst the lingering upside risk, especially with favourable base effect having been exhausted while election related spending is expected in quarter 4, 2024. However, we estimate that the latest disinflation has widened the real interest rates with the ex-post real policy rate at 8.1% in July and the ex-ante real policy rate likely at 7.2% in August 2024.”
It added that this could strengthen a dovish case at next month’s Monetary Policy Rate meeting, albeit with the Monetary Policy Committee mindful of the International Monetary Fund target amidst Treasury’s high financing need.
SOURCE: https://dew360.net
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