Inflation pressures are structural, requires complementary fiscal policy

Inflation pressures are structural, requires complementary fiscal policy – Report

IC Research has disclosed in its assessment of the December 2024 inflation update, " Beyond the bullseye, " that the recent inflation pressures appear structural and require complementary fiscal policy.

“While we await the 2025 fiscal plan with expected softening of tax burden to ease the price buildup in second-half of 2025, we foresee the potential for monetary tightening to rein-in the demand-side pressure”.

It pointed out that the Bank of Ghana will be compelled to hike the monetary policy rate in its first meeting for 2025.

As part of the possible remedial measures, we think the Bank of Ghana will be inclined to hike the policy rate at its first Monetary Policy Committee meeting in January 2025”.

Given the latest uptick in annual inflation, IC Research said Ghana’s real policy rate has further softened to 3.2%, requiring further hikes in the nominal policy rate to restore a sufficiently restrictive monetary stance.

We think the authorities may require a real policy rate of between 5.0% and 7.0% to tighten monetary conditions and restore disinflation in the ensuing months. Against this backdrop, we envisage up to 200bps rate hike at the January 2025 MPC meeting”, it added.

Headline inflation closes 2025 higher

Headline inflation came in higher than expected for December 2024, closing the year with a feeling of anti-climax as the late year upturn completely eroded the downturn in the second quarter of 2024.

Annual inflation went up 80 basis points s to 23.8% in December 2024, exceeding the authorities’ 22.0% target upper outer band under the IMF programme by 180 basis points.

Food inflation continued to heat up, accelerating by 190 basis points to 27.8% year-on-year and sustaining the general price pressure in the final months of 2024.

Non-food inflation declined for the second consecutive month to 20.3% year-on-year in December 2024, ostensibly suppressed by the favourable pass-through of the strong Cedi appreciation.

Comments

Fitch Solutions retains 2025 growth rate projection at 4.2%

Fitch Solutions has reaffirmed its projection that Ghana’s economy will expand by 4.2% in 2025. This estimate slightly exceeds the International Monetary Fund’s forecast of 4% and the World Bank’s projection of 3.9%. The UK-based research firm attributes its outlook to historically high gold prices, which are expected to cushion the Ghanaian economy against a global slowdown triggered by rising tariffs. Higher gold prices are anticipated to strengthen government revenue, enhance foreign exchange earnings, and help sustain currency stability. The report also highlights that Ghana is relatively less vulnerable to increasing trade restrictions from the United States, given that its primary exports—gold and crude oil—are not directly affected by the tariffs introduced by President Trump’s administration. Moreover, the US constitutes only about 4% to 5% of Ghana’s total exports. In contrast, Ghana’s trade relations are more heavily oriented toward China and European countries, particul...

BoG injects $20m into FX market to support 11 BDCs

The Bank of Ghana (BoG) has injected $20 million into the foreign exchange market in the latest round of its forward FX auction targeted at Bulk Oil Distribution Companies (BDCs). The intervention, which benefited eleven BDCs, is part of the central bank’s broader strategy to stabilise the cedi and ensure price stability in the petroleum downstream sector. Held on Tuesday, April 29, the auction was priced at a locked exchange rate of GHS 14.28 to the US dollar, with bid offers ranging from GHS 13.85 to GHS 15.55. This move reflects the BoG’s continued effort to deepen forex liquidity and safeguard the domestic fuel supply chain against volatility in global energy markets. By directly supplying FX to BDCs, the central bank seeks to ease pressure on the interbank market, guarantee the uninterrupted flow of petroleum products, and mitigate the pass-through effects of exchange rate fluctuations on fuel prices. The $20 million disbursement forms part of a $120 million programme for th...

Kenpong Travel & Tours Champions Breast Cancer Awareness During Customer Week

As part of activities to mark Customer Week, Kenpong Travel & Tours, a leading travel agency in Ghana, is joining the global fight against breast cancer. October is Breast Cancer Awareness Month, and the company is passionate about spreading hope and support to those affected. At Kenpong Travel & Tours, we believe that travel and exploration can be therapeutic and empowering. That's why we're committed to supporting our customers and the broader community in the fight against breast cancer. We're proud to stand in solidarity with breast cancer warriors and survivors. At Kenpong Travel & Tours, we believe that everyone deserves a chance to explore the world and create unforgettable memories. Let's prioritize health, support one another, and fight against breast cancer," said Kennedy Agyapong, CEO of Kenpong Travel & Tours. Our efforts are focused on raising awareness, promoting early detection, and supporting those affected by breast cancer. We urg...

Kofi Ahovi

Search This Blog