Ghana’s annual inflation rate fell to a 29-month low in August 2024, raising the likelihood of an interest rate cut when the country’s central bank policymakers meet on September 30.
The inflation rate slowed by 2.39% to 20.4%, down from 20.9% recorded in July.
This is according to Government Statistician Samuel Kobina Annim during a briefing in Accra on Wednesday.
Food as major driver
The primary drivers behind the reduction were price deflation in key food categories, including milk, oils, fats, and fruits and nuts, according to Annim.
Food price growth slowed significantly, easing to 19.1% in August from 21.5% in the previous month. Conversely, non-food inflation edged up to 21.5% from 20.5%. On a month-to-month basis, overall prices declined by 0.7%.
This marks the fifth consecutive month of inflation reduction in Ghana.
Despite the drop, inflation remains significantly above the central bank’s medium-term target of 8%, with a tolerance margin of two percentage points. The central bank had previously forecast inflation to fall within a range of 13% to 17% by the end of 2024.
Finance Minister Mohammed Amin Adam had earlier expressed optimism about the nation’s economic recovery, forecasting inflation to decrease to 15% by the end of 2024. He noted that the country’s economy is rebounding at a pace faster than anticipated.
The MPC has maintained the key interest rate at 29% since a rate cut in January, aiming to stabilize the cedi and prevent the currency’s depreciation from influencing inflation expectations and business pricing behavior.
However, the sustained deceleration of inflation, along with relative stability in the Ghanaian cedi, may influence the Bank of Ghana’s Monetary Policy Committee (MPC) to cut interest rates later this month.
The cedi has experienced a minor 1% depreciation against the U.S. dollar over the past month, following a more dramatic 24% decline earlier this year.
Ghana, a major producer of cocoa, gold, and oil, is grappling with one of its worst economic crises in decades. The government is currently negotiating a $13 billion debt restructuring deal, offering international bondholders the opportunity to swap their holdings before the deadline on September 30.
Ghana’s dollar bonds, maturing in 2032, saw a slight rise of 0.2 cents, trading at 52.36 cents on the dollar by 11:38 a.m. in London.
What you should know
The previous report from the National Bureau of Statistics (NBS) shows that Nigeria’s headline inflation rate decreased to 33.40% in July 2024, down from 34.19% in June 2024. This marked the first decline in the headline inflation rate since December 2022, when it last dropped to 21.34%.
Also, food inflation dropped to 39.53%, from 40.87% recorded in June 2024.
However, inflation continues to bite hard across Nigeria.
The NBS is expected to release the August 2024 Consumer Price Index (CPI) data on September 15.