- Ghana's inflation rate fell to 18.4% year-on-year in May, marking the lowest level in over three years.
- The decline is attributed to a stronger cedi, reduced import costs, favorable external market conditions, and effective monetary measures.
- The cedi has surged 44% this year, supported by elevated gold prices and declining global oil costs.
Ghana’s inflation rate fell to its lowest level in more than three years in May, driven by a stronger currency and lower import costs.
Ghana's world best currency rally drives down inflation to lowest since 2022
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Ghana’s inflation rate fell to its lowest level in more than three years in May, driven by a stronger currency and lower import costs.
Consumer inflation eased to 18.4.% year-on-year in May from 21.2% a month earlier, government statistician Alhassan Iddrisu told a news conference, adding that disinflation was expected to continue in the coming months.
"This trend underscores the effectiveness of recent monetary and fiscal measures, the recent appreciation of the Cedi against the major international currencies, favourable external price dynamics and positive market sentiment," he added.
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Ghana is emerging from its most severe economic crisis in decades, which was driven in part by disruptions in its key cocoa and gold industries.
The fifth consecutive monthly decline comes as Ghana’s cedi has surged 44% this year, the best performance among global currencies as of Tuesday, fueled in part by booming gold prices.
The rally in the currency, combined with declining global oil prices, has helped reduce pressure on domestic prices, which had exceeded 20% inflation for over three years.
As of 10:12 a.m. local time, the cedi edged down slightly by 0.1% to 10.25 per U.S. dollar.
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In terms of categories, food inflation rose by 22.8% in May, while non-food inflation increased by 14.4%.
Analysts predict interest rate cuts ahead
With inflation now on a steady downward path, some analysts believe the Bank of Ghana could begin easing monetary policy as early as next month. The central bank held its benchmark interest rate at 28% in May.
Courage Boti, an economist at GCB Bank Ltd. in Accra, said a rate cut of up to 200 basis points could be on the table.
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“It will not be tenable again to keep the policy rate that high,” given that it would leave a historically “huge” gap between inflation and official interest rates, he said.
In a March budget address, Finance Minister Cassiel Ato Forson said significant spending cuts would support efforts to lower inflation to 11.9% by the end of the year.
