GCB Capital has revealed that despite the ongoing disinflation trend, the near-term outlook for inflation remains uncertain.

While they anticipate continued disinflation through the latter half of 2024, they highlight that inflation levels remain elevated.

“These prevailing upside pressures will continue to moderate the decline in inflation and we envisage possible reversals in the inflation trend in August and later in Q4 [quarter 4] 2024. While the cedi appears to have stabilized broadly against the major trading currencies following the raft of positive news since June, the lagged impact and the second-round effects of the prevailing inflationary pressures could linger, moderating the pace of disinflation”, it said.

“Accounting for the prevalent upside risks to inflation in the near term, our revised model shows that inflation could struggle to close sub-20% even if the exchange rate pressures remain muted in 2H2024 [second half 2024]. Potential election-related expenditure in the lead-up to the December 2024 general elections could also increase GHS [Ghana cedi] liquidity in the economy and fuel demand-side inflationary pressures if not adequately mopped up”, it added.

In June 2024, inflation decelerated to 22.8%.

Despite this, GCB Capital anticipates heightened cedi liquidity in the system as the election season intensifies in the latter half of 2024, potentially exacerbating inflationary pressures.

As a result, the firm suggests a slight chance of a small interest rate cut in July 2024, with stronger prospects in the September 2024 and November 2024 policy reviews.

Overall, it predicts that nominal interest rates will remain resistant to significant declines in the foreseeable future.