Market News
Cedi Slump Likely to See Ghana Hold Rate Even as Inflation Slows - BLOOMBERG
- Inflation cooled to 25% in April, from 25.8% in March
- Cedi has depreciated 13.7% to the dollar so far this year
, Bloomberg News
, Bank of Ghana, Ghana Statistical Service, Bloomberg
(Bloomberg) -- Ghana’s inflation slowed in April as a favorable base effect comparison with last year held back the pace of price growth after the cedi weakened and fuel prices rose.
Inflation rose at an annual rate of 25% last month compared with 25.8% in March, Government Statistician Samuel Kobina Annim told reporters in the capital, Accra, on Wednesday. The median of three economists’ estimates in a Bloomberg survey was 25.2%. Prices rose 1.8% in the month.
“It’s the base effects from last year which is doing most of the movement in the year-over-year rate,” Mark Bohlund, a senior credit analyst at REDD Intelligence, said prior to the data release.
Without the base effects “seasonal factors as well as the impact from the weakening cedi and higher fuel prices” would have driven the inflation rate higher, he said.
The main contributors to the deceleration were easing food prices. Food inflation ebbed to 26.8% from 29.6% in March and non-food costs rose 23.5% from 22.6%.
The cedi has depreciated 13.7% against the dollar this year, making it the world’s fourth worst performing currency of those tracked by Bloomberg. The slide has been partly driven by a slump in cocoa earnings.
Revenue from exports of the beans, which Ghana uses to defend the currency, fell by almost a third to $508.4 million in the first two months. A mix of adverse weather, disease and a shortage of fertilizer has curbed output in the world’s second-biggest producer of the chocolate ingredient.
Upside Risk
Despite the deceleration in inflation, the Bank of Ghana is expected to act cautiously and again leave its benchmark interest rate unchanged at 29% when it gives its next decision on May 27, Courage Boti, an economist at GCB Capital Ltd. in Accra, said by phone ahead of the release.
“There’s a considerable upside risk to the outlook,” Boti said. “The prints thus far have shown an undulating trend and the tighter for longer stance will be needed to guide inflation sustainably down toward the 2024 target.”
The central bank in January forecast inflation to trend down to between 13% and 17% by the end of the year, before gradually easing back to within the medium term target range of 6% to 10% by 2025.
--With assistance from Simbarashe Gumbo.
