Ghanaian investment firm GCB Capital warns that the fight against inflation is not over despite a recent slowdown.
Disinflation Trend on Hold?
While disinflation (gradual decline in inflation) is expected to continue in the latter half of 2024, GCB Capital highlights factors that could cause inflation to rise again. These include:
- Lingering Effects of Past Inflation: Even if the exchange rate stabilizes, the impact of past inflation may linger, slowing down the disinflation process.
- Potential Election Spending: Increased government spending in the run-up to December’s elections could inject more money into the economy, boosting demand and potentially pushing inflation upwards.
Revised Inflation Forecast
Due to these potential upside risks, GCB Capital has revised its inflation forecast. They now believe inflation might struggle to fall below 20% by year-end, even if the exchange rate remains stable.
Interest Rate Outlook
Despite the inflation concerns, GCB Capital sees a possibility of a small interest rate cut in July. However, they believe more significant cuts are more likely in September and November 2024. Overall, they expect nominal interest rates to trend downwards.
The Bottom Line
The battle against inflation in Ghana is a delicate one. While some progress has been made, the path to a stable price environment remains uncertain.
