By Toma Imirhe
The Bank of Ghana has put its aggressive monetary easing cycle on hold, with its Monetary Policy Committee (MPC) deciding last week to maintain the benchmark Monetary Policy Rate (MPR) at 14% for the next two months, after cumulative cuts of 1,400 basis points since July 2025.
The decision, announced at the end of the MPC’s 130th regular meeting in Accra, signals growing caution by the central bank despite Ghana’s improving macroeconomic indicators, subdued inflationary pressures and relative exchange rate stability.
Governor Johnson Pandit Asiama said the MPC judged risks to inflation and growth as “broadly balanced,” but external uncertainties particularly escalating tensions in the Middle East and their impact on global crude oil prices had become too significant to ignore.
“The committee evaluated other forms of risks…but the elephant in the room here is the Middle East crisis,” Dr Asiama said during the post-MPC press briefing. “Up to this time, one is not sure whether it is temporary or whether it is going to be long-lasting.”
The MPC’s decision effectively interrupts the sharpest monetary easing cycle in Ghana’s recent history. Since July 2025, the central bank has lowered the policy rate from 28% to 14% as inflation slowed dramatically, the cedi stabilised and fiscal consolidation under Ghana’s IMF-supported programme improved investor confidence.
The last reduction came in March 2026, when the MPC cut the rate by 150 basis points from 15.5% to 14%.
Consequent to the MPC’s cautious decision last week, commercial bank lending rates, which had begun trending downward following the successive policy rate cuts, are now expected to stabilise rather than decline further in the short term. Analysts say banks are likely to maintain relatively elevated lending margins because of lingering credit risk concerns and uncertainty over future inflation trends.
Dr Asiama himself acknowledged that monetary policy easing often takes time to transmit fully into commercial lending rates, explaining that “although rates are falling, it may take a while. You don’t just rush into giving loans. There has to be adequate bankable projects and you don’t compromise your credit appraisal standards,” he noted.
As a result, top-tier corporate borrowers may continue accessing cedi-denominated bank credit at rates between 18% and 24%, while medium-sized enterprises are likely to face rates ranging from 25% to 35% depending on sectoral risk and collateral quality, according to treasury market analysts.
For households and individuals, unsecured consumer loans and credit facilities are expected to remain relatively expensive, often above 30% annually despite the sharp reduction in the benchmark rate over the past year.
Non-bank financial institutions, including savings and loans companies and finance houses, are also expected to keep lending rates relatively high because of their elevated funding costs and weaker access to low-cost deposits compared with universal banks.
On the fixed income market, the MPC’s decision is likely to reinforce the recent stabilisation in yields after months of steep declines.
Treasury bill yields have fallen sharply since late 2025, reflecting improving macroeconomic stability and strong liquidity conditions. However, investors have recently shown greater caution amid uncertainty over global inflation and oil prices.
Fixed income dealers say the decision to hold the MPR at 14% could anchor short-term treasury bill rates near current levels rather than allow them to decline much further before the next MPC meeting in July.
Investors are also expected to continue preferring shorter-dated instruments such as the 91-day and 182-day Treasury bills over longer-term bonds because of uncertainty about the future direction of inflation and interest rates.
Longer-term domestic bonds, meanwhile, may see yields stabilise or even edge slightly upward as investors price in inflation risk premiums linked to higher global energy prices.
For the government, the MPC’s cautious stance means domestic borrowing costs may not decline as rapidly as the Finance Ministry had hoped. Nonetheless, current rates are dramatically lower than the crisis-era levels recorded in 2023 and early 2024.
The decision to pause the successive series of cuts in the MPR resulted from the marginal rise in headline inflation in April 2026 to 3.4 percent from 3.2 percent in March the first increase since late 2024 driven partly by higher non-food prices and exchange rate-related base effects. At the same time, renewed instability in the Middle East has pushed global crude oil prices sharply upward, reviving fears of imported inflation.
The Bank of Ghana is particularly concerned that sustained higher oil prices could trigger second-round inflation effects through transport fares, utility tariffs and production costs.
Dr Asiama warned that a prolonged disruption to global energy markets could reverse recent gains in inflation control.
“The disruption to trade flows following the blockade of the Strait of Hormuz has led to a sharp increase in international crude oil prices and reignited inflationary pressures,” he said.
Financial market participants broadly welcomed the MPC’s decision, arguing that preserving macroeconomic stability remains more important than accelerating monetary easing.
The central bank also announced additional liquidity tightening measures alongside the rate decision, including a revision to the dynamic cash reserve ratio framework requiring banks to maintain a uniform 20 percent reserve requirement in domestic currency from June 4.
Analysts believe the move is intended to strengthen monetary policy transmission and mop up excess liquidity that could otherwise fuel speculative activity in foreign exchange and government securities markets.
Despite the pause in rate cuts, the MPC maintained a cautiously optimistic assessment of Ghana’s economy, noting continued growth in private sector activity, industrial production and trade.
The Bank’s Composite Index of Economic Activity expanded by 12.6 percent year-on-year in March 2026, compared with 2.3 percent during the same period last year.
