Ghana's annual inflation rate fell to its lowest since 1992 in July, potentially paving the way for new cuts in interest rates in the West African state.

Consumer price inflation dipped to 8.39 percent from 8.59 percent in June, the fifth consecutive monthly decline, Ghana's statistical office said on Wednesday.

The drop comes ahead of a Bank of Ghana Monetary Policy Committee review of policy rates later this month.

"We continue to see room for the Bank of Ghana to lower their reference rate at least another 50 bps later this year," said Stephen Bailey-Smith, an analyst at Standard Bank.

The central bank cut interest rates by 50 basis points to 12.50 percent at its last meeting in July, when the government said inflation was under control, bringing cuts to the rate to 600 points since 2009.

"Ghana's inflation rate can reach a low of 7.7 percent by the end of the third quarter if the cedi (currency) remains stable and utility prices as well as domestic petroleum prices remain unchanged during the period," said Sampson Akligoh, analyst at Databank Financial Services.

The government said the decline in the pace of inflation was largely due to slim increases in the food sector.

The start of oil production in Ghana late last year has led to a jump in economic growth and there are mounting fears it, coupled with increased public sector wages, may lead to a rise in inflation in the West African nation.

But the government said it did not believe the decision to boost public sector wages by 20 percent in 2011 would threaten Ghana's target of 8.5 percent inflation this year.

"The government's end of year target is not threatened by the pay hike -- rather, it will depend on other pressures and how the government reacts to them," government statistician Grace Bediako said while presenting the new inflation figure.

She said the July rate was the lowest since June 1992, when annual inflation posted 8.37 percent.

Ghana's MPC will meet August 29 and is scheduled to announce a decision on interest rates on August 31.