By Adnan Adams Mohammed
In a bold move signaling high confidence in the country’s macroeconomic recovery, the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has reduced the Prime Rate by 250 basis points, bringing it down from 18% to 15.5%.
The decision, announced today at the conclusion of the 128th MPC meetings, marks the lowest borrowing cost for the country since early 2022. The cut exceeded the expectations of many market analysts, who had largely predicted a more conservative 200-basis-point reduction.
Disinflation Drives the Decision
Addressing a press conference in Accra, the Governor of the Bank of Ghana, Dr. Johnson Asiama, attributed the aggressive cut to a sustained and sharp decline in headline inflation.
“The Committee noted that the disinflation process has remained remarkably firm,” the Governor stated. “With inflation dropping to 5.4% in December 2025—its lowest level in over three years—the current policy stance is designed to consolidate these gains while providing the necessary breathing room for private sector credit growth.”
This latest move follows a series of significant cuts in late 2025, including a 350-basis-point reduction in November, as the central bank shifts its focus from aggressive tightening to supporting sustainable economic growth.
Key Highlights from the MPC Report
Inflation Outlook: The BoG expects inflation to remain within its medium-term target band of 8±2% throughout 2026.
Economic Growth: Real GDP growth showed strong momentum in the final quarters of 2025, supported by robust non-oil sector performance.
Currency Stability: Improved foreign exchange reserves, currently estimated to cover over four months of imports, have provided a buffer for the Cedi, allowing for a more accommodative monetary stance.
Global Context: The Committee noted that while global conditions remain volatile, the domestic “inflation-slaying” efforts have created a unique window for easing.
Market Reaction
The news has been met with immediate optimism from the business community. Local manufacturers and SMEs, who have long complained about the high cost of capital, are expected to see a gradual reduction in commercial bank lending rates in the coming weeks.
“This is the signal the market has been waiting for,” said one local economist. “By cutting more than expected, the BoG is telling us they believe the ‘inflation ghost’ has been truly exorcised.”
Caution Ahead
Despite the optimism, the Governor cautioned that the Committee remains vigilant. He emphasized that the BoG would not hesitate to “re-calibrate” should any fresh risks such as global energy price shocks or fiscal slippages threaten the hard-won price stability.
The next MPC meeting is scheduled for March 2026, where the committee will review the initial impact of today’s cut on the 14-day interbank bill and broader market liquidity.
