Ghana inflation up slightly in December

ACCRA: Annual inflation in Ghana rose slightly to 8.58 percent in December from 8.55 percent recorded in November, the national statistics office said on Wednesday, paving the way for a likely rate hold by the central bank next month.

Below are initial comments from analysts:

NII AMPA-SOWA, DATABANK GROUP

"We believe that the stability of the local currency towards the end of 2011 contributed to keeping inflationary pressures relatively subdued in December 2011. Achieving the single-digit inflation targets of 2012 is likely to be a Herculean task, owing to the increases in ex-pump prices as well as wage pressures and higher infrastructural spending, which typically occurs during an election year in Ghana."

NALINI CUNDAPEN, SOCIETE GENERALE

"Ghana's inflation profile continues to be favourable, meaning central bank action may be muted. Despite wide concern over growing inflationary risks linked to fiscal spending in the election year, utility price hikes and a weakening cedi, inflation has taken its cue from 2011, remaining stable since H1. This should help the Bank of Ghana to keep rates on hold at the forthcoming mid-Feb MPC meeting. Though, we believe given the BOG's growth bias, a cut cannot be ruled out. That said, given the currency weakness, we expect rates to be maintained.

"Despite Ghana's solid growth dynamics and improving external position, we are slightly negative on the currency for now given the lack of central bank support."

RAZIA KHAN, STANDARD CHARTERED

"Another surprise! The November inflation print had exhibited an acceleration in month-on-month inflation, although the year-on-year remained well-behaved. On that basis, and given evidence of increased demand ahead of Christmas, as well as recent Ghana cedi weakness, we might have anticipated a higher year-on-year inflation reading in December - perhaps closer to 9 percent. Instead, the Dec. release points to year-on-year inflation of only 8.58 percent, suggesting that prices are still generally well-behaved.

"Going forward, the emphasis is likely to be on the January inflation release, and what follows in the months thereafter, as that will more accurately reflect the impact of Ghana's recent 15 percent upward adjustment in domestic fuel prices. But with a starting point that is this favourable, and given the fairly muted impact of the last 30 percent petrol price increase (albeit against a backdrop of less robust economic and spending growth), the fuel price adjustment need not be the key determinant of the inflation outlook. The favourable Dec CPI print certainly suggests that there will be little pressure on the Bank of Ghana to hike interest rates immediately in response to the fuel price increase. The MPC will have the luxury of time to gauge more of the impact of that increase on inflation in the months ahead, before needing to move. Interest rates are likely to remain on hold, at least until April, with the outside risk that rates are on hold even longer if inflation remains well-behaved."

KOBLA NYALETEY, BARCLAYS GHANA:

"The Dec 2011 print of 8.58 percent, just 3 basis points up from the Nov 2011 figure of 8.55 percent, once again surprises to the downside in our estimation. This is strongely positive given the continuing GHS (cedi currecncy) weakness in Dec 2011 and emerging stable commodity price increases notably maize prices. We had expected a figure very close to 9 percent.

"We see all risks to inflation in the short term intact. In addition, the 20 percent increase in petroleum product prices in late Dec 2011 will exert further upward pressure. Q1 2012 is very likely to see inflation rising, making a strong case for rate tightening by the Monetary Policy Committee of the Bank of Ghana."

LISA LEWIN, BUSINESS MONITOR INTERNATIONAL

"Although inflation remains contained for now, we see upside risks in 2012 stemming from the recent removal of fuel subsidies, the feed-through effects of currency weakness and the buoyant economic growth environment."