Ghana achieved an
economic landmark on Wednesday as annualised June inflation fell to
9.52 percent, the first time the key indicator dipped into single
digits since April 2006.
That was down from
10.68 percent in May and was the 12th consecutive monthly fall,
prompting hopes of a further cut in the 15 percent prime rate on Friday
after the Bank of Ghana holds a rate meeting.
“A rate cut of at
least 100 basis points is very much on the cards. We would not be
surprised if we saw a lot more,” said Razia Khan, head of Africa
research at Standard Chartered bank.
The government of
the world’s No. 2 cocoa producer said it hoped the pace of inflation
would continue to slow in the coming months, adding that it expected
little impact from a hike in utility prices and public sector wages.
“Presently we don’t foresee anything that will offset this trend,” said Grace Bediako, government statistician.
The utility price
and wage hikes were not fully reflected in the June inflation data, but
would likely show up in the July figures which will be released next
month, a source at the statistics office said.
Finance Minister
Kwabena Duffuor said the decline in the pace of inflation was a “major
achievement” and added the government was committed to policies that
would allow for further decreases in interest rates.
Outlook clouded
Ghana, which is
also Africa’s second-biggest gold miner and due to become an oil
exporter by the end of the year, is eager to transform its
aid-dependent economy and is hoping that a low prime rate will spur
more business activity.
Fiscal
belt-tightening and a stabilisation of the cedi currency has
contributed to steep declines in the pace of inflation from peaks over
20 percent in 2009, and paved the way for the central bank to trim
rates three times since November.
Six out of seven
analysts polled by Reuters said they expected the Bank of Ghana to cut
rates by another 50 to 100 bps this week, though several noted concern
about potential inflationary pressures in the second half of the year.
Bediako said a 42
percent hike in electricity prices and 21-135 percent hikes in water
rates, which started to roll out across the country last month, were
unlikely to affect inflation because utilities make up only a small
part of Ghana’s consumption.
“The weight is about 3 percent and overall it cannot make any significant impact,” she said.
She added a 10 percent pay rise for public sector workers set for this month was also unlikely to push up consumer prices.
Analysts have said
both the utility hike and the public sector wage increase have the
potential to reverse the disinflationary trend.
“We see inflation
rising sharply over the second half of the year, not just due to base
effects, but also owing to currency weakness as well as recent
increases in electricity tariffs and public sector pay,” said Lisa
Lewin at Business Monitor International.
Analysts said oil revenues could also boost consumer prices.
