Already, market watchers are predicting that the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) will keep the benchmark policy rate at its current level at the next meeting in May, following a significant decline in consumer inflation to 45 percent in March 2023.
Since inflation is set to continue on a disinflationary run through the second and third quarters, analysts expect the tight monetary policy stance to continue so as to anchor inflation.
With three consecutive months of disinflation, month-on-month deflation across the food and non-food baskets and the main items driving inflation, the market expects sharp drops of inflation in the coming months, sustained by cedi appreciation, easing pump prices of fuel, and favourable base drift.
Therefore, RMB in its Africa Market Insider briefing said it expects the trend to continue over the next few months, particularly if demand for the American greenback remains relatively muted – trading at under US$1 = GH¢13.
“We therefore expect the MPC to maintain rates at the current level in the next meeting,” RMB added.
According to data from Ghana Statistical Services (GSS), inflation reached its highest point at 54.1 percent in December 2022 following a 19-month acceleration – with food inflation recorded at 50.8 percent in March 2023 and non-food inflation at 40.6 percent.
Although inflation is expected to continue its decline, it is still projected to end the year well above 20 percent – again, almost three times the central bank’s upper target.
However, weak currency fundamentals, the price effects of crude oil output cuts, and the uncertain global economic outlook remain upside risks to inflation in the near-term.
Similarly, GCB Capital expects the tight monetary policy stance to continue, with the MPC holding its policy rate at 29.5 percent for a while to firmly anchor inflation expectations.