News Guide Africa

Tag: policy rate

  • Analysts back Fitch forecast; project 3.5% policy rate cut

    Analysts back Fitch forecast; project 3.5% policy rate cut

    Market watchers are increasingly aligning with Fitch Solutions’ projection of a sharp reduction in the Monetary Policy Rate (MPR) at the Bank of Ghana’s next Monetary Policy Committee meeting in January 2026, forecasting a substantial 350-basis-point cut that would lower the rate from 18% to 14.5%.

     

    Their expectations follow continued improvements in key macroeconomic indicators.

     

    November inflation dropped to 6.3%, while the Ghana Reference Rate (GRR) for December stands at 15.93%. Lending rates, averaging between 21% and 22%, remain significantly above inflation, prompting calls for a decisive policy adjustment to realign the interest-rate environment with current price stability.

    Finance and Tax Analyst Nelson Cudjoe Kuagbedzi tells Citi Business News that the prevailing economic data provides enough room for the central bank to ease its monetary stance more aggressively.

     

    “For November, inflation was 6.3 percent, policy rate was at 18 percent, the Ghana Reference Rate is around 15.93 percent, and lending rates hover between 21 and 22 percent. Clearly, there is a huge gap between inflation and the policy rate.

     

    We expect the MPC to cut the rate by about 350 basis points to 14.50 percent. Once this happens, lending rates should decline, allowing for credit expansion to the private sector, which needs cheaper funds for growth and sustainable job creation.”

     

    Players say a steeper rate cut could stimulate borrowing, support private-sector investment, and sustain Ghana’s economic recovery momentum as inflation stabilises.

  • Policy rate cut to spur job creation – Dr Ato Forson

    Policy rate cut to spur job creation – Dr Ato Forson

    Ghana’s Finance Minister, Dr. Cassiel Ato Forson, has hailed the Bank of Ghana’s decision to cut the policy rate to 18%, the lowest since March 2022, as a “major milestone” in the country’s economic recovery.

    The Monetary Policy Committee (MPC) of the Bank of Ghana reduced the policy rate by 350 basis points, citing growing stability in the economy and declining inflation levels, which currently stand at 8% as of October, down from 27% in November 2024.

    Dr. Forson believes this move will boost lending, ease credit pressures on businesses and households, and stimulate economic growth.

    “This marks a drastic fall from the 27 percent recorded in November 2024. The move reflects renewed economic confidence, and it means lower borrowing costs, improved access to credit, and greater room for businesses and individuals to grow, invest, and create jobs.”

    “The recovery is clearly strengthening, and it can only get better!” he remarked.

    The Bank of Ghana’s Governor, Dr. Johnson Asiama, announced that the committee is optimistic about maintaining price stability and keeping inflation within the target band.

    “The bank will continue to monitor developments and take necessary policy decisions to ensure sound macroeconomic conditions.”

    The central bank projects a continued stable inflation profile around the target and well into the first half of next year, 2026. This is against the backdrop that current risks in the outlook to shift the path of inflation away from target have moderated significantly.

    Dr. Asiama added that the prevailing high real interest rate provides some room to ease policy to further boost the current growth recovery efforts.

    “Given these considerations, the committee, by majority decision, voted to lower the monetary policy rate further by 350 basis points to 18.0%”, he announced.

    “We have one additional measure. In addition to the policy rate reduction, the bank will now return to the use of the 14 day bill as its main instrument for conducting open market operations”.

    Consequently, average lending rates have also fallen sharply to 22.22% in October 2025, from 30.07% in January 2025, making credit more accessible to businesses and individuals, according to the Bank of Ghana’s November 2025 Summary of Economic and Financial Data.

    From 30.07% in January 2025, the average lending rates increased to 30.12% in February 2025, but fell to 29.18% in March 2025.

    It further decreased to 27.40% in April 2025 and then to 26.90% in May 2025. However, it rose marginally to 27.00% in June 2025, but has since taken a dive.

    Additionally, the Ghana Reference Rate has also fallen sharply to 17.86% in October 2025, from 29.72% in January 2025.

    Meanwhile, the average lending rates vary among the banks and the respective sectors they lend to. Some banks offer loans equivalent to the Ghana Reference Rate, whilst others will charge rates as high as 39%.

    This, however, depends on the risk profile of the customers.

     

    By Adnan Adams Mohammed

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • Analysts anticipate sharp policy rate cut as BoG’s MPC meets this week

    Analysts anticipate sharp policy rate cut as BoG’s MPC meets this week

    The Bank of Ghana’s Monetary Policy Committee (MPC) meets over three days, this week, from Monday, November 24 to Wednesday, November 26, with markets and businesses broadly expecting another significant easing of the benchmark Monetary Policy Rate (MPR) after months of rapid disinflation.

    The MPR is the rate at which the central bank lends to commercial banks in its role as lender of last resort to smoothen their short term liquidity shortfalls and it thus serves as an indicative rate guiding interest rates across the financial markets

    After an aggressive easing cycle during the third quarter of this year — the MPC cut the MPR by 300 basis points in July and then further by a record 350 basis points in September to 21.5% — economists, research houses and treasury desks are braced for a further step down. Central bank Governor, Dr Johnson Asiama has repeatedly pointed to improving macroeconomic indicators and anchored inflation expectations as the rationale for easing during the two consecutive rate cuts earlier this year.

    Financial research houses are split on quantum but have a consensus on direction. IC Research says stronger disinflation and cedi appreciation give scope for a deep reduction — it has modelled an aggressive 400 basis-point cut to around 17.5%. Other local forecasters, including Databank and United Capital, urge a more cautious approach but also expect a cut in the 200–300 basis-point range.

    Banks and lenders are braced for pronounced interest rate margin pressure if the MPC delivers another large cut. Fitch Ratings has warned that sequential rate reductions this year will squeeze bank net interest margins and profitability, a concern echoed by local bank chiefs at industry engagements with the governor. Many banks are, however, publicly supportive of lower policy rates to revive credit to the real economy if the disinflation path holds.

    Borrowers and manufacturers — especially small and medium-sized firms that have faced tight credit conditions for much of the past two years — are among the most vocal proponents of faster easing. “Lower MPRs will finally translate into cheaper working capital and investment loans, vital for manufacturing recovery,” said a senior executive at a leading Accra-based food processor. Exporters and commodity producers are more mixed; while lower domestic rates reduce financing costs, exporters caution that a sharply stronger cedi could hurt competitiveness and indeed have been pressing government for targeted measures to dampen exchange-rate swings.

    Portfolio investors and the fixed-income market are watching the MPC closely for guidance on the likely path for government securities yields and liquidity. Yields have come down in recent months as the central bank signaled a dovish stance and many foreign portfolio managers tell clients they expect another cut but will watch the size closely before repositioning.

    “A calibrated cut of 200–300bps would be consistent with the recovery narrative and should bring further yield compression,” a fixed-income strategist at a regional fund said, his views reflecting wider sentiment among many financial market operators.

    Government’s Finance Minister Dr Cassiel Ato Forson has highlighted fiscal consolidation and exchange-rate stability as complements to monetary easing, telling investors this month that fiscal discipline has helped create room for policy normalisation. That partnership — between tighter fiscal policy and a now (cautiously) dovish central bank — is central to expectations that the MPC will act to significantly cut interest rates further.

    Weighing official comments, research-house forecasts and market pricing, financial commentators suspect the most likely outcome is a cut of 250–300 basis points, taking the MPR into the 18.5–19.0% range. A 400bps move to below 18% remains an unlikely but possible scenario though if the central bank’s forecasts for November inflation point to another sharp drop and the cedi’s exchange rate remains firm. Any decision will hinge largely on the committee’s risk assessment of possible impending food and utility-price shocks and the government’s ongoing fiscal trajectory.

    The MPC will deliver its decision and hold a press conference on Wednesday, November 26. Markets will read both the number and the Governor’s statement – he doubles as the Chairman of the MPC – closely for forward guidance on how fast the easing cycle can continue into 2026.

     

     

  • Policy rate cut: Economist alarmed quantum of cut

    Policy rate cut: Economist alarmed quantum of cut

    An Economist has raised concerns over the Bank of Ghana cut in policy rate by 350 basis points to 21.5 percent amid potential inflationary pressures.

    He posited that the central bank should have been more measured in slashing the policy rate cut cautioning possible reverse of inflationary trend due to pending utility tariffs rise.

    Although the cut is expected to stimulate economic activity, Economist Professor at the University of Ghana, Patrick Asuming, raised concerns that the central bank may be underestimating short-term risks to price stability. However, the Governor of Bank of Ghana dismissed such fears, explaining that anticipated cocoa inflows, donor support, gains from the recent forex crackdown, and rising gold prices all point to a favourable outlook for the cedi.

    Dr Johnson Asiama, while addressing the press conference after the BoG’s Monetary Policy Committee (MPC) last week, further noted that regulatory measures had led to a significant rise in remittances, prompting a review of the Bank’s year-end targets, which remain on track while indicating that, there was no plan to revise the end-of-year inflation target of 12 per cent, despite improvements in the economy.

    Meanwhile, Prof Asuming, reacting to the MPC decision in a radio interview, described the move as premature.

    “Personally, I think that it is quite aggressive. Even if there was going to be a cut, considering that at the previous meeting there was a substantial cut, I would have thought that if there was going to be a cut, it would be rather moderate,” he said.

    He explained that with expected adjustments in electricity and water tariffs, inflationary pressures could resurface, undermining the effectiveness of such a sharp rate cut.

    The policy rate used by the BoG to influence lending rates and inflation plays a critical role in shaping borrowing costs for businesses and households.

    Contrary to the worry of Prof Asuming, the Director of Research at the Bank of Ghana (BoG), Dr. Philip Abradu-Otoo, has explained how the central bank arrives at its decision on the key policy rate, stressing that every factor that affects how businesses and consumers spend is taken into account.

    According to him, the process is far more complex than many assume.

    “The things that go into deciding as to where to put the key policy rate of a central bank involve many factors.

    “The committee in arriving at this decision discusses issues about the real sector of the economy,” he said in an interview.

    He explained that the real sector remains central to the decision-making process.

    “So, when we talk about the real sector of the economy, we are talking about how businesses are faring. We’re talking about how consumers are also faring, and whether consumers are feeling the pinch of economic adjustment that is taking place, whether spending in the economy is at a level that is consistent with what the fiscal authorities, for instance, might expect, because the more we spend, the more the fiscal authorities are also able to extract revenues for development purposes.”

    Dr Abradu-Otoo noted that the Bank of Ghana has developed its own way of gauging the performance of the real sector, even as it relies on official data from the Ghana Statistical Service.

    “So, when we talk about the real sector of the economy, it’s about what you and I are doing in the economy. It’s about what businesses are doing in the economy.

    “And we try to gauge the tempo of all these activities in the economy, imports, exports, all these things fit under the real sector of the economy.”

    The central bank, he said, does not only look at economic activity but also the direction of prices.

    “We try to gauge activities in the real sector of the economy. We try to look at what is going on with respect to prices, inflation, you call it inflation.

    “And then we try to even look at what the forecast of all these indicators looks like, especially for inflation, and are we getting close to our target?”

    He added that the banking sector’s role is also weighed in policy decisions.

    “And having done this, we also look at even the banking sector, are they positioned in a way to help support growth in the economy, because the main job of banks in the country is to support growth. Okay, so are banks well-positioned to deliver growth in the economy?”

    The process, he said, then factors in risks to ensure the final decision is sustainable.

    “And having done that, we then look at the risks surrounding all these things, and then we try to put all these things together in a framework to decide as to whether going forward, we should be confident about ourselves, and whether going forward we think that the risks are very minimal, and whether we can then reposition our key policy rate to deliver continued growth sustainably. I think the keyword is sustainable manners.”

    By Adnan Adams Mohammed

  • BoG likely to tighten policy rate further

    BoG likely to tighten policy rate further

    By Elorm Desewu

    With the recent hike in the US interest rate to 3.75 percent, the Monetary Policy Committee, (MPC) of the Bank of Ghana, (BoG) is likely to raise the policy rate further.  

    The Federal Reserve last week increased the benchmark rate to its highest in 14 years. The bank hopes pushing up borrowing costs will cool the economy and bring down price inflation.

    The BoG has from November 2021 increased the policy rate to about 1000 basis points or 10 percent to settle at 24.5 percent in attempt to control the rising inflation as well as stem the speed depreciation of the Ghana cedi.

    Already, the Bank of Ghana is projecting a higher inflation due to the currency depreciation, and the recent upward adjustments in utility tariffs, transport costs, as well as general price increases.

    The revised forecast assumptions, together with worsening external financing conditions, heightened inflation expectations, and rising production costs are likely to shift inflation further upwards in the near term, the Bank of Ghana said in its report.

    The current assessment of inflation outlook largely points to significant upside risks, occasioned by price pressures from both domestic and foreign sources. Price pressures in the global economy have elevated and unfolded beyond the volatile items of energy and food, reinforced by the transmission effects of persistent global supply chain challenges and the Ukraine war. These have triggered aggressive monetary policy tightening in advanced economies with some spillovers on the domestic economy.

    On the domestic front, the upward adjustments in petroleum products and transport fares with associated second-round impacts on goods and services as well as the pass-through of currency depreciation have exerted significant upside risks on inflation and heightened inflation expectations. On the downside, however, it is expected that the harvest season and tight monetary policy stance would moderate some inflationary pressures in the medium-term.

    Consistent with development in headline inflation, underlying inflation pressures also remained heightened, suggesting that price pressures have become more broad-based than before.

    The Bank’s core inflation measure, which excludes energy and utility prices, increased to 32.6 percent in August 2022 from 30.2 percent in July. Nevertheless, trends in month-on-month inflation suggested a consistent deceleration for the third consecutive time. The monthly headline inflation declined to 1.9 percent in August 2022, down from 3.1 percent in July and 3.0 percent in June respectively.

    Month-on-month food inflation similarly dropped to 1.8 percent in August, from 3.3 percent in July and 2.3 percent in June 2022. Also, non-food monthly inflation decelerated to 2.0 percent in August 2022 from 3.0 percent in July, and further down from 3.6 percent in June 2022

    The increase in interest rate would make investing in the US economy better than Ghana, leading to capital flight and a stronger dollar.

  • Policy rate to rise further

    Policy rate to rise further

    By Elorm Desewu

    With the steady surge in year on year inflation, the seven member Monetary Policy Committee, (MPC) of Bank of Ghana is likely to hike the policy rate further for next couple of months, as they commence their bimonthly meeting this week.

    Investors may be compelled to sell their cedi holdings, if the MPC committee decides to hold the policy rate at 22 percent.

    Inflation is expected to rise further as the increase in electricity and water tariffs have taken effect from September 1, 2022 coupled with a just announced 30% increase in commercial road transport fares scheduled for September 21, will exert intense upward pressure on inflation for this month. togel toto

    As inflation rises, inevitably so will interest rates and thus the cost of business financing.

    The policy  rate is the at which universal banks borrow from the central bank as their last resort and also serves as a bench mark in setting the Ghana Reference Rate.

     As a result of the inflation targeting, the BoG was forced to hike its MPR by 750 basis points since May this year, to 22% currently. This has drastically raised the cost of borrowing for government and businesses alike and will unavoidably curb Ghana’s economic growth.  But the central bank sensibly points out that strong economic growth is not sustainable with inflation so high anyway.

    This year, a combination of rising global energy prices, the reversal of capital inflows into Ghana by foreign bond investors and the inability to access the Eurobond market for hitherto customary annual forex funding has led to a 35% depreciation of the cedi against the United States dollar during the first eight months of this year, this fuelling import inflation.

    But the BoG has banked it hopes on the US$750 million Afreximbank loan as well as the pending US$1.3 billion cocoa syndicated loan to shore up it’s reserves and also stabilize the cedi.

  • Ghana’s policy rate of 19% second highest in Sub-Saharan Africa

    Ghana’s policy rate of 19% second highest in Sub-Saharan Africa

    Ghana’s policy rate of 19% is the second highest in Sub-Saharan Africa after Angola, Fitch Solutions tracking of 20 countries in the region has revealed.

    This is coming after the recent adjustments of the key lending rate of many central banks in the region.

    Ghana’s banking industry has been characterised by high lending rates, making cost of doing business expensive, compared to neighboring Côte d’Ivoire (policy rate of 4%) and Nigeria (policy rate of 11.50%).

    However, this is due to largely weak fiscal economy, compelling the Bank of Ghana to increase its benchmark indicator- the policy rate – to help control the rising inflation as well as the volatility of the cedi.

    The policy rate which is the key indicator that the Central Bank lends to commercial banks have gone up by 5.5% in the last nine months.

    Though some have argued that the Bank of Ghana’s Inflation Targeting framework is not the best tool to fight inflation, the Central Bank has refuted that claim.

    The policy rate is a key determinant of lending rates in the country, but that is not the only factor banks consider in pricing loans.

    Banks will usually not lend below 91-day Treasury bill rate which is presently above 24%.

    The financial intermediaries also prioritise inflation, cost of funds and non-performing loans as some key factors considered before lending.

    Meanwhile, Equatorial Guinea, Cameroon and Gabon have the lowest policy rate of 3.50% each in Sub Saharan Africa.

    COUNTRY POLICY RATE (%)

    Cameroon 3.50

    Guinea 3.50

    Gabon 3.50

    Congo Brazzaville 3.50

    Coted’lvoire 4.00

    Togo 4.00

    South Africa 5.25

    Botswana 5.50

    Tanzania 6.00

    Uganda 7.50

    Congo DRC 7.50

    Kenya 8.00

    Zambia 10.00

    Ethiopia 10.00

    Nigeria 11.50

    South Sudan 12.00

    Malawi 12.00

    Mozambique 15.75

    Ghana 19.00

    Angola 20.00