Annualised inflation in Ghana fell to 11.66 percent in April from 13.32 percent in March, the statistics office has announced, a greater than expected drop that offers hope for further rate cuts later this year.
The drop is the 10th consecutive fall, takes inflation to its lowest level since December 2007 and is another step towards the West African nation’s single digit target by the end of the year.
“That is some decline … and even though we expect that we might reach the lower turning point of inflation around the mid-year, this should provide ample opportunity still for the Bank of Ghana to cut interest rates,” said analyst Razia Khan at Standard Chartered.
In May, the Bank of Ghana lowered its prime rate by 100 basis points to 15 percent, feeding expectation of at least another rate cut this year as long as inflation maintains its downward path.
“Another 100 bps off the prime rate in June has always looked more or less certain … but this latest inflation print opens up the possibility that the easing cycle might be extended,” Khan said.
“However, an important factor countering this would be growing evidence of pressure on the fiscal deficit relative to budget plans,” she said, referring to the need for budget cuts due to the repayment of arrears.
Ghana, one of the few sub-Saharan countries with a Eurobond, expects its first oil revenues from offshore finds by the end of the year, and some analysts expect growth to more than double to 15 percent in 2011.