News Guide Africa

Tag: Monetary Policy Rate (MPR)

  • Ghana’s economy navigates inflation easing and structural debt

    Ghana’s economy navigates inflation easing and structural debt

    By Adnan Adams Mohammed

     

    Ghana’s macroeconomic landscape reflects a delicate transition from emergency fiscal stabilization to long-term structural recalibration.

    Following a turbulent period marked by comprehensive sovereign debt restructurings, rapid currency depreciation, and double-digit price increases, key performance indicators suggest an economy finding its footing. However, underlying structural vulnerabilities, ranging from elevated borrowing costs to persistent energy sector liabilities, continue to temper broader growth expectations.

    Data from the Bank of Ghana and the Ghana Statistical Service highlights a notable deceleration in headline inflation from historic highs. This disinflationary trend has allowed monetary authorities to transition away from aggressive monetary tightening, stabilizing the benchmark policy rate at 14.0%. Backed by strong international prices for gold, resilient cocoa receipts, and steady donor inflows under ongoing multilateral support programs, the Cedi has experienced reduced volatility compared to previous adjustment cycles, bolstering foreign exchange reserves and consumer sentiment.

     

    Macroeconomic Indicator Previous Peak / Level Current Estimate Policy Implications

    Real GDP Growth 0.5% (2020) ~4.8% – 5.0% Driven primarily by non-oil services and industrial extraction.

    Monetary Policy Rate 30.0% (July 2023) 14.0% Easing liquidity constraints while maintaining an anti-inflationary bias.

    Public Debt-to-GDP ~61.0% ~45.5% Reflects restructurings, though debt-service ratios remain elevated.

    Current Account Deficit Surplus (~4.4% of GDP) Supported by trade surpluses in the extractive export sectors.

     

    Expert Perspectives on the Recovery

    The ongoing trajectory of the domestic economy remains a subject of active debate among monetary authorities, international development partners, and private enterprise operators:

    “The current policy stance is intended to steer inflation toward the central bank’s medium-term target while allowing policymakers more time to assess incoming data and its implications for the domestic economy”, Dr. Johnson Asiama, Governor of the Bank of Ghana.

     

    “We are moving into a phase of measured recovery, where fiscal stability and disciplined debt management take priority over rapid, unchecked expansion”, World Bank Regional Lead, Africa Economic Update.

     

    “While easing inflation helps bring down operational input costs, high interest rates and cautious consumer spending mean small businesses still face tight liquidity”, Kwame Addo, Private Sector Analyst & Trade Consultant

     

    “Ensuring that the macroeconomic gains filter down to the real economy requires sustained investment in domestic value-addition, particularly in agribusiness and light manufacturing”, Abena Mensah, Senior Fellow at the Center for Economic Policy

     

    Key Growth Drivers vs. Downside Risks

    ● Primary Growth Drivers: The non-oil services sector led by telecommunications, financial services, and digital trade continues to serve as the chief engine of domestic output. This is complemented by strong extractive yields from high gold production and an improved balance-of-payments position that provides crucial import cover.

    ● Fiscal and Structural Challenges: Although the primary budget deficit has narrowed under strict expenditure controls, high legacy debt-service obligations, tight domestic credit conditions, and elevated youth unemployment continue to restrict private sector capital investment.

    ● Energy Sector Liabilities: Accumulating arrears within the domestic power supply chain remain a notable implicit fiscal liability, requiring continued sector reform to prevent fiscal slip-ups.

    ● External Volatility: External commodity price fluctuations, particularly shifting global oil and cocoa prices, continue to present vulnerability to state revenue projections and foreign exchange supply.

    While macroeconomic stabilization initiatives have successfully curbed runaway inflation and reduced currency volatility, translating these top-line figures into widespread employment creation and improved living standards remains the chief hurdle for economic managers over the medium term.

     

  • BoG amends Cash Reserve Ratio to mop up GH¢16bn …and shield Cedi from market pressures

    BoG amends Cash Reserve Ratio to mop up GH¢16bn …and shield Cedi from market pressures

    By Adnan Adams Mohammed

    In a decisive regulatory intervention designed to insulate the domestic currency from building macroeconomic shocks, the Bank of Ghana (BoG) is adjusting its Cash Reserve Ratio (CRR) framework.

    According to internal policy evaluations and market analysts, the sweeping technical amendment is highly likely to drain more than GH¢16.0 billion (US$1.1 billion equivalent) in excess liquidity from the interbank market, providing immediate structural relief to the Ghanaian cedi.

    The proactive liquidity squeeze represents a major cornerstone of the central bank’s broader strategy to aggressively anchor inflation, manage asset-liability currency mismatches, and maintain the current macroeconomic reset.

    Currency realignment eliminates structural banking risks

    The regulatory adjustment fine-tunes the dynamic CRR framework for commercial banks by utilizing a strict currency-matching operational system. Under previous iterations, financial institutions were allowed to maintain cedi-equivalent reserves against foreign-currency deposits. This mechanism often introduced severe asset-liability imbalances when severe foreign exchange volatility emerged.

    By mandating that cash reserves be held in the exact currency of the corresponding deposit liabilities, the central bank eliminates the structural imbalance. The move effectively locks up billions in volatile foreign exchange and domestic liquidity that would otherwise put intense pressure on commercial exchange windows.

    Central bank data confirms that this enforcement arrives at a time of exceptional macroeconomic recovery. Headline inflation in Ghana has seen a sharp decline, plummeting from 23.8 percent in December 2024 down to a stable 3.4 percent. Concurrently, the central bank has built up its gross international reserves to a robust $14.4 billion—providing 5.7 months of solid import cover to cushion the state against unpredictable global disruptions.

    Policy Rate maintained at 14% to preserve stability

    The liquidity drain coincides with the decision of the BoG’s Monetary Policy Committee (MPC) to hold the benchmark Monetary Policy Rate steady at 14.0 percent. Speaking on the decision, the Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, explained that while the internal economy is recovering strongly, geopolitical uncertainties in the Middle East and global commodity market volatility demand a highly vigilant policy stance.

    “The committee assessed risks in the outlook to inflation and growth as broadly balanced, and therefore decided to maintain the monetary policy rate at 14.0 percent,” Dr. Asiama stated during his policy briefing. “Our domestic economy continues to recover strongly, supported by robust private sector credit growth, industrial production, and expanding international trade. However, exchange rate stability, rising reserve buffers, and continued fiscal discipline remain our primary operational tools to moderate emerging risks.”

    Governor urges CEOs to deploy private capital for industrialization

    Addressing captains of industry at the 10th Ghana CEO Summit in Accra, Governor Asiama emphasized that while the central bank is absorbing billions of excess cedis to guarantee monetary and price stability, the responsibility for structural transformation now shifts to the private sector.

    “Macroeconomic stability creates an enabling environment, but it is the private sector that must ultimately drive the country’s economic reset,” Governor Asiama told the assembly of corporate executives. “Ghana has now moved past economic recovery to a state of converting those gains into a foundation for industrial competitiveness. As CEOs, you are the architects of economic growth… Ghana’s economic transformation will not happen by accident; it will require disciplined choices, resilient institutions, innovative businesses, and courageous leadership.”

    The Governor noted that the central bank’s aggressive open market stabilization interventions—which incurred GH¢17 billion in liquidity management expenses to secure the historic inflation drop—were completely necessary to give local businesses a stable, predictable horizon to invest their equity.

    Private sector demands sustained policy predictability

    The central bank’s focus on macro-stability was welcomed by corporate leaders at the summit, who agreed that keeping excess cash from chasing scarce foreign exchange is critical for long-term corporate forecasting. Business heads noted that the combination of a steady 14 percent policy rate, aggressive liquidity absorption via the CRR, and an expanding national reserve buffer provides a reliable shield against the currency depreciations that historically eroded corporate capital.

    With the central government concurrently enforcing a mandatory commitment control regime to curb state spending, the synchronized alignment of monetary and fiscal policies signals that Ghana is aggressively fortifying its defensive structures to ensure the current growth surge is sustained far into the future.

     

     

     

     

     

  • BoG’s dynamic CRR is a liquidity management upgrade

    BoG’s dynamic CRR is a liquidity management upgrade

    The decision by the Bank of Ghana as announced last week, to introduce a 20 percent dynamic Cash Reserve Ratio (CRR) framework for commercial banks marks one of the most important refinements to monetary operations in recent years. Although overshadowed by the Monetary Policy Committee’s decision to retain the benchmark policy rate at 14 percent, the new liquidity management tool could ultimately prove even more consequential for the stability and efficiency of Ghana’s banking system.

    At its core, the move reflects a welcome transition from blunt monetary tightening instruments towards more flexible and market-sensitive liquidity regulation.

    Under the previous reserve arrangement, banks were required to maintain fixed reserve balances with the central bank regardless of prevailing liquidity conditions within the financial system. The dynamic CRR system changes this by allowing the central bank to vary reserve requirements in response to liquidity developments, credit growth patterns and macroeconomic conditions. In practical terms, this gives the central bank a more precise mechanism for controlling excess liquidity without excessively distorting credit creation or interest rate transmission.

    This is particularly important at the current stage of Ghana’s economic recovery.

    Since mid-2025, the Bank of Ghana has aggressively reduced the Monetary Policy Rate by a cumulative 1,400 basis points as inflation decelerated sharply and macroeconomic stability improved under the IMF-supported reform programme which ended less than a fortnight ago. Those rate cuts were intended to lower borrowing costs and stimulate private sector activity. However, rapid liquidity accumulation within the banking system has increasingly threatened to weaken monetary discipline and rekindle inflationary pressures.

    The challenge facing the central bank has therefore become more nuanced. It now needs to support growth while simultaneously preventing surplus liquidity from fuelling speculative demand for foreign exchange, destabilising the cedi or encouraging imprudent credit expansion.

    The dynamic CRR framework offers a sophisticated answer to that challenge.

    By requiring banks with stronger deposit growth or larger liquidity surpluses to hold proportionately more reserves, the central bank can sterilise excess liquidity more efficiently. Unlike across-the-board tightening measures, this approach allows policy intervention to be more targeted and responsive to changing market conditions.

    Importantly, the new system should also improve interbank market discipline. Banks will now have greater incentive to manage their liquidity positions prudently rather than relying excessively on short-term funding opportunities or central bank support facilities. This could deepen activity in Ghana’s interbank money market and improve pricing efficiency across short-term instruments.

    There are additional macroeconomic benefits as well.

    A more actively managed liquidity framework strengthens the transmission of monetary policy decisions into the broader economy. One of the longstanding weaknesses of Ghana’s monetary regime has been the disconnect between policy rate adjustments and actual lending behaviour by banks. Excess liquidity has often diluted the impact of policy tightening or easing. By calibrating reserve requirements dynamically, the central bank can better align system liquidity with its monetary policy objectives.

    The move should also support exchange rate stability. In Ghana, surplus cedi liquidity frequently migrates into the foreign exchange market, especially during periods of declining domestic yields. Containing excessive liquidity growth could therefore reduce speculative pressure on the cedi and help sustain the recent exchange rate stability achieved since late 2025.

    Naturally, implementation risks remain. If applied too aggressively, higher reserve requirements could constrain credit to the private sector and weaken economic momentum. Transparency in the calibration process will therefore be essential to avoid market uncertainty or perceptions of regulatory arbitrariness.

    Nevertheless, the broader policy direction deserves commendation. The Bank of Ghana is signalling that monetary management is evolving beyond simple interest rate adjustments towards more flexible and data-driven liquidity control. For a financial system emerging from recent macroeconomic turbulence, that evolution is both timely and necessary

     

  • Lending, deposit rates to remain unchanged …as BoG maintains 14% policy rate for next 2 months

    Lending, deposit rates to remain unchanged …as BoG maintains 14% policy rate for next 2 months

    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.

     

     

     

     

  • Bank lending rates fall in response to latest BoG benchmark interest rate cut

    Bank lending rates fall in response to latest BoG benchmark interest rate cut

    By Toma Imirhe

    Following the latest cut by the Bank of Ghana’s Monetary Policy Committee (MPC) to its benchmark Monetary Policy Rate (MPR) which it trimmed it by 250 basis points to 15.50% at its late-January 2026 meeting Ghana’s commercial banking sector has begun to adjust its deposit and lending rate structures amid evolving credit conditions. The MPR cut, the first major policy action of 2026, reflects a broader easing cycle that has seen multiple reductions since mid-2025 and is intended to support economic recovery while preserving price stability.

    Responding to the fall in benchmark rates, Ghana’s commercial lenders have begun adjusting their interest rate schedules, particularly for variable-rate loan customers:

    According to industry sources, many commercial banks have started trimming interest rates on both existing and new loan facilities in line with the decline in the Ghana Reference Rate, notably since early January. These adjustments have largely affected borrowers on variable interest rate contracts, where repayment terms automatically realign with benchmark movements.

    The Ghana Association of Banks (GAB) has noted that the transmission of reference rate cuts into commercial lending rates is progressing across most lenders, even as critics warn that the pace of transmission still needs to accelerate to offer tangible cost relief to businesses.

    On the deposit side, while comprehensive data for 2026 remains limited, financial market observers report deposit rate cuts have remained relatively low compared with the declines in lending yields. This suggests banks are balancing a narrowing interest margin with competitive needs for deposit mobilization, especially in a softer monetary environment.

    Although specific banks have not publicly detailed broad, sector-wide lending rate cut announcements, analysts assert that larger lenders such as GCB Bank Limited, Ecobank Ghana, Absa Bank Ghana Limited and Stanbic Bank Ghana Limited historically among those with competitive lending portfolios are likely adjusting their loan pricing across products to mirror the lowered Ghana Reference Rate (GRR) and the MPR.

    The GRR, which is effectively the base lending rate used by commercial banks to price most loans and influenced by the MPR, interbank and government securities yields, has fallen modestly to 14.58% in early February 2026 from 15.68% in January.

    Treasury bill rates, which feed into the GRR calculation, have also declined following the policy adjustment. In the first week of February, yields on 91-day, 182-day and 364-day bills slid to roughly 9.97%, 11.82% and 12.06%, respectively, down from levels reported during late January auctions.

    Interbank rates the cost of overnight funds traded between banks have similarly eased, contributing to the lower GRR, although these remain well above the deposit rates, reflecting ongoing liquidity management in the banking system.

    Historical data from the Bank of Ghana also shows that average lending rates the headline price of credit across all maturities have steadily declined over the past year. By the end of 2025 these averaged just over 20%, down sharply from around 30% in early 2025.

    The MPR, a foundational anchor for money market interest rates in Ghana, started the easing cycle in 2025 from 28% during the first half of the year, to 25% in late July, before it moved down to 21.5%, September and then to 18% by late November, before this latest substantial reduction. This series of cuts increasingly improved liquidity conditions and assisted the downward momentum in key market rates.

    Looking ahead, market analysts largely expect the central bank to maintain an easing bias in coming MPC meetings, especially if inflation remains subdued within or near the medium-term target band and economic growth remains on track. This outlook suggests the possibility of further cuts or at least a sustained lower policy rate later in 2026, which would reinforce the downward trajectory for money market rates and promote cheaper credit availability.

    While challenges such as deposit rate rigidity and credit risk premiums persist, the policy pivot to a 15.50% MPR and ongoing transmission into commercial bank pricing signals meaningful progress in lowering borrowing costs for Ghana’s businesses a critical element for renewed investment and economic momentum in 2026.

    Consumer and corporate borrowers alike will be watching closely for both subsequent MPC decisions and more decisive rate adjustments from major lenders in the weeks ahead.

     

     

  • GNCCI Applauds BoG’s Bold Rate Cut …presses banks to follow suit

    GNCCI Applauds BoG’s Bold Rate Cut …presses banks to follow suit

    The Ghana National Chamber of Commerce and Industry (GNCCI) has thrown its support behind the Bank of Ghana’s (BoG) decision to slash the Monetary Policy Rate from 18% to 15.5%

    The Chamber described the move as a “timely policy intervention” that signals a new era of business recovery and private sector–led growth for 2026.

    In a statement released on Thursday, January 29, 2026, the Chamber noted that this latest 250-basis-point cut brings the cumulative reduction in the policy rate to 11.5 percentage points over the last 12 months (January 2025 to January 2026).

    GNCCI President Mr. Stephane Miezan commended the Ministry of Finance and the central bank for their coordinated effort in stabilizing the economy. The Chamber attributed the steady decline in rates to prudent fiscal management and a gradual easing of the monetary tightness that has long hampered Ghanaian businesses.

    “This sustained reduction… reflects improving macroeconomic conditions and a gradual easing of monetary tightness,” the statement noted. “We encourage continuation of these efforts to rebuild business confidence.”

    The “Hidden” Costs of Credit

    Despite the celebration of the BoG’s decision, the GNCCI raised a red flag regarding the slow “transmission” of these cuts to the average borrower. The Chamber expressed deep concern that commercial banks have yet to significantly lower their lending rates, which remain prohibitively high for many.

    The GNCCI identified several “non-interest cost components” that continue to inflate the cost of credit by an additional 4% to 5%:

    ● Bank-specific risk premiums

    ● High operating costs and profit margins

    ● Processing and arrangement fees

    ● Commitment charges

    Banks Begin to Chase Borrowers

    However, the central bank sees a different side of the story. Speaking at the 128th Monetary Policy Committee (MPC) press briefing on Wednesday, January 28, the Governor of the Bank of Ghana, Dr. Johnson Asiama, revealed that the tide is beginning to turn.

    “Banks are beginning to call clients if they need loans,” the Governor disclosed, citing reports of banks offering rates as low as 15% to court reliable borrowers. Dr. Asiama described this as a positive signal of renewed liquidity and confidence within the banking system, suggesting that balance sheets are finally strengthening enough to support private-sector expansion.

    A Call to Action for Commercial Banks

    The Chamber warned that if commercial banks across the board do not align their rates with the central bank’s direction, the benefits of the rate cut will remain out of reach for many Small and Medium Enterprises (SMEs).

    To bridge this gap, the GNCCI is urging financial institutions to:

    1. Reduce non-interest charges: Lower the fees that artificially hike the cost of borrowing.

    2. Leverage risk-sharing: Utilize credit enhancement frameworks to mitigate lending risks.

    3. Support productive sectors: Focus on industries that drive job creation and long-term economic resilience.

     

     

  • Businesses, households await banks response to latest 250 bps Policy Rate cut

    Businesses, households await banks response to latest 250 bps Policy Rate cut

    By Toma Imirhe

    The Bank of Ghana again shook up financial markets last week with a 250 basis point reduction in its Monetary Policy Rate (MPR) to 15.5%, the lowest level in four years, signaling a strategic shift from inflation containment to supporting economic growth and credit expansion. The decision, announced by Dr. Johnson Pandit Asiama, Governor of the BoG, at the conclusion of the first Monetary Policy Committee (MPC) meeting for 2026, on Wednesday, January 28, reflects improving macroeconomic conditions, including a sharp decline in inflation and a strengthened external position.

    While a cut was widely expected, predictions by market analysts and commentators as to its size ranged from 100 basis points (bps) to 300 bps. The latest cut arrived at through a majority decision by MPC members is the fourth in a series of consecutive cuts in the MPR which began in late July last year and which have cumulatively lowered it by 1,250 bps from the 28% at which it stood for most of the first half of 2025.

    Announcing the decision last week, Dr. Asiama emphasized that the committee was encouraged by sustained disinflation and stable inflation expectations. He added that real interest rates remain elevated, allowing the central bank to “gradually recalibrate policy without undermining macroeconomic stability

    Analysts expect the cuts at the policy level to transmit over the coming months into lower commercial bank lending and deposit rates, though the speed and magnitude of this transmission will depend on competitive dynamics in the banking sector, risk perceptions, and broader liquidity conditions.

    Commercial banks set their own pricing based partly on the BoG’s policy signal plus risk premiums, operating costs, and desired profit margins. According to the Ghana National Chamber of Commerce and Industry (GNCCI), many lenders still maintain lending rates well above the policy rate, reflecting additional cost layers that add an estimated four or five percentage points to final borrowing rates. These costs, GNCCI argues, act as a drag on the full impact of monetary easing for businesses.

    One Accra-based banker, speaking on condition of anonymity, noted that lending rates could fall by 100–150 bps in the next two or three months as banks recalibrate pricing, but cautioned that the pace will vary by institution based on their respective costs of funds and risk appetite. “Where we’re seeing immediate softening is in short-term small and medium sized enterprise and trade finance facilities, which are now being re-priced closer to 19–20% from previous mid-20s levels,” the banker said.

    For private enterprises, especially SMEs, the initial expectation is that credit will become more affordable and accessible, supporting investment, working capital financing, and expansion plans. It is instructive that last year’s overall net 900bps cut supported a reduction of average lending rates to 20.45% from 30.25% and a rebound in real private-sector credit growth to 13.1%, up from 2.0% growth in 2024.

    “The rate cut is a timely boost for business recovery and private sector–led growth,” said an enthused GNCCI executive last week, applauding the central bank’s move but urging commercial banks to complement the policy cut with lower effective loan pricing and risk-sharing frameworks.

    However, some enterprises remain cautious. Many firms continue to face non-interest costs, collateral requirements, and high risk premiums the banking industry’s non-performing loans ratio remains elevated at 18.9% even though this is lower than the 21.8% it stood at by the end of 2024, which mean that even with an MPR at 15.5% effective borrowing costs can remain closer to 20% or more. The gap between the BoG’s benchmark rate and actual lending rates underscores the structural frictions in Ghana’s credit markets.

    On the household side, the reduction in the policy rate is expected to trickle down into lower deposit rates, though this process typically lags borrowing rate adjustments. Retail banks are likely to reduce savings and fixed-term deposit rates by 50–100 bps over the next three to six months, incentivizing consumption and potentially encouraging borrowing for mortgages, vehicle loans, and personal credit. Households holding time deposits at banks could see yields compress further as financial institutions pivot away from high-cost funding.

    Credit cards, mortgage products, and consumer loans may see a similar recalibration, albeit tempered by banks’ concerns over non-performing loans and capital adequacy. According to central bank data though, most Ghanaian banks met regulatory capital thresholds by end-December 2025 following a period of regulatory forbearance and sector cleanup, improving their capacity to expand credit.

    Several key factors will influence how commercial bank lending and deposit rates adjust.

    One is their liquidity conditions. With inflation subdued and reserves strengthened, liquidity in the banking system has improved a prerequisite for lower interest rates. Banks with excess liquidity and stable deposit bases are better positioned to pass through cuts to customers.

    Another is credit risk and non-performing loans (NPLs). Elevated NPL ratios remain a concern and so banks with large portfolios of distressed assets may be reluctant to slash lending rates aggressively until asset quality stabilizes further.

    A third determining factor is competition. Competitive pressure among mid-tier banks in particular could accelerate interest rate reductions, particularly in segments like SMEs and consumer credit where price sensitivity is high.

    Added to these will be macroeconomic expectations. If inflation remains anchored and the cedi stable, as the Bank of Ghana projects, market expectations of further rate cuts could take hold, prompting forward-looking adjustments in long-term borrowing and fixed income rates.

    Market participants widely expect that full transmission of the latest policy rate cut to most commercial loan and deposit products will take up to anywhere between two and four months, with some segments adjusting sooner, while more structurally rigid products like long-term mortgages may take more than half a year to reflect the new policy environment.

    By the end of last week, none of the commercial banks had publicly responded to the latest MPR cut with announcements of loan or deposit re-pricing, but the commencement of such announcements is anticipated over the coming weeks. .Effective policy transmission will be crucial for translating lower policy rates into tangible benefits for businesses and households alike.

     

     

     

  • BoG slashes policy rate to 15.5% as inflation plummets

    BoG slashes policy rate to 15.5% as inflation plummets

    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.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • Time to look beyond monetary policy to economic restructuring

    Time to look beyond monetary policy to economic restructuring

    This week, the Bank of Ghana’s Monetary Policy Committee will meet for the first time this year, and their deliberations will culminate in a decision on where the central bank’s benchmark Monetary Policy Rate will stand for the next two months.

    There have been tremendous improvements in various key macroeconomic performance indicators over the past year inflation has dropped to a long term low, taking interest rates down with it, the cedi has enjoyed historic appreciation against the United States dollar and has stabilized at a rate barely two-thirds of what it was as at late 2024, the merchandize trade surplus has reached a record high and so have gross international reserves.

    Consequently, the universal expectation is that yet another cut in the MPR will be announced this week, with the benchmark rate’s current 18% – even though 1,000 basis points lower than the 28% it stood at during the first half of 2025 now more than three times the 5.4% headline consumer inflation rate recorded for December.

    But even as the private sector enthusiastically look towards yet another round of consequent interest rate cuts, the BoG Governor, Dr Johnson Asiama late last year correctly warned that monetary policy on its own cannot ensure the sustained stability of the country’s economy.

    The initial hawkish monetary stance of the BoG, combined with government’s fiscal restraint and consequent consolidation worked to bring inflation down sharply, before the central bank began its historically steep cut in its benchmark interest rate between late July and now. Instructively, government has still not opened the fiscal taps and the BoG has kept a tight lid on liquidity growth even as has pushed interest rates downwards.

    But while all this has reaped huge rewards with regards to macroeconomic stability, its sustainability will depend on collective efforts by government, the BoG, the private sector and the general populace, to both increase non-traditional exports and even more importantly, reduce import dependency.

    These efforts have to be directed towards a less external sector driven, more sustainable external macro-economic balance. To be sure, Ghana is now achieving a bigger merchandise trade surplus than at any other time over the medium to long term. But this is primarily the result of the unprecedented surge in the gold price on the international market which will not last much longer even though the rising import bill will, in the face of cheaper foreign exchange and cheaper credit with which to buy it.

    It is imperative therefore that Ghana both cuts its dependency on imports and diversifies its sources of forex, outside of simply borrowing it in inordinate quantities, which created the economic mess the country is only now rebounding from in the first place.

    Fiscal policy and the BoG’s forex sales allocations need to deliberately support efforts in both of these regards. This means import substitution and non-traditional export promotion.

    To be sure, Ghana has aspired for both for a long time now. But non-traditional export promotion has taken precedence without due consideration for increased local value added and consequently, the import bill has continued to rise inordinately even as increased NTE revenues have been sticky.

    We therefore welcome the government’s emphasis on import substitution as a policy priority, since it should be easier to reduce import consumption than to increase NTE sales.

    Without achieving both however, Ghana’s impressive economic rebound will not be sustainable.

     

     

     

     

     

  • MPC Watch: markets brace for rate cut as Ghana’s disinflation defies gravity

    MPC Watch: markets brace for rate cut as Ghana’s disinflation defies gravity

    By Adnan Adams Mohammed

    Financial market players have all their ears and eyes set on the Bank of Ghana’s Monetary Policy Committee (MPC) as they deliberate on the direction of the benchmark Monetary Policy Rate (MPR) at a pivotal moment for the nation’s economic recovery.

    The policy decision, to be disclosed by Governor Dr. Johnson Pandit Asiama tomorrow Wednesday, January 28, 2016, will set the tone for borrowing costs and investor sentiment for the next two months. As Ghana’s economy continues its steady disinflation trajectory, the consensus among stakeholders is clear: the time for a bold “Policy Rate cut” has arrived.

    A Historic Shift in Strategy

    The MPC in November 2025 trimmed the MPR by 350 basis points to 18.0%, marking the third consecutive aggressive cut in a cycle of monetary easing. This move reflected a dramatic improvement in price stability.

    The primary catalyst for this dovish stance is the collapse of inflation. The latest data from the Ghana Statistical Service (GSS) shows headline inflation for December 2025 falling to 5.4%. This is not just the lowest in decades; it is officially below the floor of the Bank’s medium-term target band of 6%–10%.

    “Inflation has eased faster than we anticipated,” Governor Asiama noted in a recent media engagement. “With stability restored, 2026 is about consolidation and ensuring that stability translates into durable confidence.”

    Why Analysts Expect a 14.5% Rate

    Financial market forecasters are increasingly vocal in their calls for a fresh cut. Analysts tracking the MPC ahead of the January 28 announcement have flagged expectations of another 350-basis-point reduction. If realized, the policy rate could fall to approximately 14.5%.

    Several factors bolster this argument:

    ● Cedi Stability: Buoyed by stronger foreign exchange reserves and consistent inflows, the Ghana cedi has remained remarkably stable, neutralizing the risk of “imported inflation.”

    ● Real Interest Rates: With inflation at 5.4% and the MPR at 18%, the “real” interest rate remains exceptionally high. Experts from the Centre for Policy Analysis (CPA) argue that this provides significant “buffer room” to lower nominal rates without risking capital flight.

    ● Fiscal Discipline: Tight coordination between the Ministry of Finance and the Central Bank has reduced the need for the BoG to finance government deficits, allowing the MPC to focus purely on price stability.

    The “10% Dream”: Relief for Borrowers?

    For the private sector, the stakes could not be higher. Despite the aggressive cuts in 2025, average lending rates from commercial banks remain slightly above 20%. Businesses in credit-sensitive sectors like manufacturing, real estate, and agriculture are desperate for these cuts to “filter through” to their bottom lines.

    Governor Asiama has set a high bar for his tenure, aspiring to see lending rates fall to 10% or less. While banks caution that the transmission mechanism depends on their own balance sheet conditions and competitive pressures, a sizable cut this week would be a massive signal for expansion and job creation.

    A Note of Caution

    However, the path to 14.5% is not without hurdles. Some economists urge the MPC to be “measured and forward-looking,” warning that global financial uncertainties or a sudden spike in utility tariffs could reignite inflationary pressures.

    Regardless of the final number, the outcome of this week’s meeting will be a defining moment for Ghana’s 2026 economic narrative. Whether the Bank chooses a “bold slash” or a “cautious trim,” the goal remains the same: transforming hard-won stability into tangible growth for every Ghanaian.