In February 2024, inflation is expected to rise for the second consecutive month, reaching 23.9%. IC Research has identified potential factors that could contribute to this increase, including new taxes like the emissions levy affecting the industrial and transport sectors, as well as higher excise duty on cider beer and imported plastic packaging.
The projection for the annual and monthly inflation rates in February 2024 is 23.9% year-on-year and 2.2% month-on-month. This rise is anticipated to lower the real policy rate and may lead to the Monetary Policy Committee (MPC) keeping the March 2024 rate decision on hold at 29.0%.
Surprisingly, headline inflation rose by 30 basis points in January 2024 to 23.5% year-on-year, contrary to expectations of a decline. The unexpected uptick in inflation is attributed to various factors, such as the strength of the Ghanaian Cedi, stable energy prices, and the delayed impact of lower electricity tariffs.
This increase in headline inflation breaks a trend of five consecutive months of decline in annual inflation rates. The rise is primarily driven by a significant increase in non-food inflation by 180 basis points to 20.5% year-on-year, outweighing a 160 basis points decline in food inflation to 27.1% year-on-year.
Both food and non-food inflation rates edged up on a month-on-month basis, with headline inflation at 2.0%. The increase in monthly inflation rates raises concerns about the pace of decline in annual inflation for the first half of 2024, especially in light of new taxes introduced in the 2024 budget and potential pass-through effects of recent foreign exchange pressures.
While there have been lower year-on-year inflation rates for most food items, certain categories like vegetables and tubers have experienced significant increases. As the planting season approaches between April and June 2024, there is a cautious outlook for food inflation due to these developments.
The latest data and projections suggest a challenging environment for inflation management in the coming months, with various economic and external factors contributing to the upward pressure on prices.
