Ghana: Inflation will not diminish until further monetary policy tightening – Report states

IC Research, a research firm, reports that unless the Bank of Ghana implements further monetary policy tightening, the increasing inflation will not diminish. Their forecasts from the Monetary Policy Committee indicate a slightly higher elevated profile for the upcoming year.

The report suggests that if not addressed with additional policy adjustments, the upside risks in inflation could become ingrained in underlying inflationary pressures.

Despite anticipating a near-term return to disinflation with an expected food harvest in mid-3Q2023 and a favorable base effect in 4Q2023, the report acknowledges the presence of significant upside risks.

According to the recent inflation expectation survey conducted by the Bank of Ghana, business expectations of inflation remain stable at a higher level.

IC Research believes that the stable inflation expectations are a result of the positive effect of four consecutive months of decline in inflation. However, this decline has been counteracted by recent increases in inflation caused by supply-side factors and tax-induced inflation upticks in the past two months.

IC Research also pointed out that the recent surge in global crude oil prices, with Brent crude reaching $85 per barrel, may lead to a resurgence of non-food inflation, especially with the possibility of higher utility tariffs as part of the baseline scenario.

In essence, while ongoing fiscal and monetary tightening efforts have temporarily subdued the inflationary pressures, the inflationary “monster” will not be completely subdued without additional policy tightening measures.