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ACCRA (Reuters) - Annual inflation in Ghana fell again in December and is set to ease further, the statistics office said on Friday, raising expectations of more rate cuts in one of West Africa's premier economies.

Inflation fell to 15.97 percent from 16.92 percent the month before, broadly in line with a target of around 15 percent issued by the government in November.

"The rate of inflation for December 2009 is 15.97 percent, the lowest in 2009," government statistician Grace Bediako told a news conference, adding that most price pressure was coming from non-food items.

Speaking after the news conference, she told Reuters the downward trend was sustainable "in the coming months".

"What we've observed also from the previous years is when we enter a new year with a particular trend, we tend to follow it for some time... Barring any other situations that are contrary to what we have been experiencing, we expect it will continue."

Ghana, which is looking to reap the first benefits of oil production in late-2010, has been under pressure from the International Monetary Fund to bring inflation down from rates of around 20 percent seen in 2009.

President John Atta Mills' government has been helped in its efforts to tackle inflation by the gradual appreciation of the cedi against the dollar, cutting import prices.

OIL PRICE RISK

Analysts now expect further cuts to the Ghanaian prime interest rate through 2010 after the central bank in November announced the first lowering in nearly three years, with a 50-basis-point cut to 18.0 percent.
"Certainly we can expect further interest rate cuts now over the course of 2010 -- at least 100 to 150 basis points in the first half," said economist Markus Schneider at UBA.

"Inflation seems to be subsiding but the price of oil remains the main risk," he added.

Oil traded at around $79 per barrel in London on Friday, with the speed of global recovery a key determinant of future world demand and prices.

Standard Chartered Bank maintained its forecast for an aggressive series of cuts totaling 400 basis points.

"Look for the authorities to front-load this easing, with a substantial cut now expected at the next MPC meeting," Africa research head Razia Kahn said of the next meeting of the central bank's rate-setting committee, a date for which has yet to be confirmed.

Ghana, the world's number two cocoa producer and one of only a few sub-Saharan African countries with a Eurobond, expects by the end of this year to be benefiting from oil revenues.

Its Jubilee field is estimated to hold as much as 1.8 billion barrels of oil. First production from the field is scheduled for the fourth quarter of 2010 and output could ramp up to 150,000 barrels per day within months of that.

The relatively high level of interest rates has for months discouraged activity on the Ghanaian bourse, with investors instead preferring the attractive yields on government bonds.