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Ghana’s annual inflation rate fell to 9.02 percent in April, the
country’s statistics office said on Wednesday, the second dip in a row that
reinforces prospects of a rate hold decision by the Bank of Ghana this week.

Analysts said the surprise fall from 9.13 percent in March might
spark calls for a further rate cut, but for now, the consensus was for the
prime rate to be held at 13.5 percent and some analysts warned that inflation
could take off again soon.

Fuel price hikes pushed inflation higher in January but the
national statistics office said the stabilisation of fuel prices, coupled with
the abundance of food and a relatively stable exchange rate, had led to dip in
April.

“This is a good reading, especially given the inflationary
pressures stemming from high oil prices and a relatively weak currency,” said
Lisa Lewin, an analyst at London-based Business Monitor International.

“It looks almost certain that rates will be kept on hold this
time around, but as soon as inflation edges back into the double digits, we can
expect a hiking cycle to commence,” she added.

Separately, the statistics office said the Ghanaian economy grew
7.7 percent in 2010. Analysts see that accelerating to around 13 percent this
year thanks to oil revenues. An expected announcement of first quarter 2011
growth was put back to June.

Food for thought

The Bank of Ghana’s Monetary Policy Committee is due to announce
its decision on interest rates on Friday. Ahead of Wednesday’s announcement,
seven out of ten banks polled said they were expecting the rate to be unchanged
at 13.5 percent.

“The immediate impact of this will be to set people thinking
…whether with the Prime Rate at 13.5 percent since last July there is any
probability of a late-cycle rate cut,” said Standard Chartered analyst Razia
Khan.

“While the good news on inflation will certainly boost the case
of those who have been arguing for a rate cut, our call is still for the Bank
of Ghana to keep interest rates on hold.” Mr Khan cited possible volatility in
the Ghana cedi, concern over Ghana’s fiscal deficit, a trend towards higher
inflation and improved credit access for the private sector as reasons for
holding the rate steady.

Non-food inflation was almost three times that of the food group
in April. High fuel prices, hikes in public sector wages and the influx of oil
revenues since Ghana started pumping oil last year have all raised the
prospects of steady increases in the pace of inflation over the year.

Reuters