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Tag: The Monetary Policy Committee

  • 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.

     

     

  • Higher tourist arrivals is among major drivers of Ghana’s improved economy – Bank of Ghana

     

    Monetary policy committee of the bank of Ghana

    The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has said, in relation to the domestic economy that high-frequency indicators point to continued improvement in economic activity in Ghana.

     

    In the third quarter of 2024, the committee said that the BoG’s high-frequency real sector indicators pointed to a sustained pick-up in economic activity.

     

    The updated real Composite Index of Economic Activity (CIEA) recorded an annual growth of 2.2 percent in September 2024, compared to a contraction of 0.4 percent in the corresponding period of 2023.

     

    “Major drivers of the improvement in economic activity include increased port activity, households and firms consumption of goods and services , construction activities, credit to the private sector, and higher tourist arrivals,” a statement issued after the 121st MPC sitting on Friday November 29 said.

     

    The committee kept the Policy Rate at 27 per cent.

     

    The statement explained that while global economic conditions remain favourable, the strength of the US economy coupled with a strong United States dollar and the possibility of a resurgence in global energy and food prices arising from trade protectionism, geopolitical conflicts, and extreme weather conditions will have to be monitored closely for policy responses to ensure stability in the economy.

     

    It noted that domestic macroeconomic conditions remain stable and the International Monetary Fund External Credit Facility (IMF-ECF) Programme implementation remains on track.

     

    Data observed through October 2024 indicated broad stability in the macroeconomic indicators. Growth outturn so far has been strong, and leading indicators of economic activity is projecting stronger growth in the second half of the year, business and consumer confidence is slowly turning around, core inflation remains broadly stable, the financial sector inflation expectations remain broadly anchored, reserve build-up has been sufficient to provide confidence, and the currency is recording some appreciation, it said.

     

    It added that the third review assessment of the IMF on the economy and on programme implementation also reflected a positive assessment and led to a Staff level Agreement.

     

    “Indications are that the IMF Board will meet in December to assess programme implementation thus far and assess forward-looking prospects of the economy. Sussessful completion of the assessment will likely trigger the release of additional US$360 million in December 2024. This should provide more impetus to stability,” the committee said.

     

    Regarding the local currency, the committee said that the cedi’s rebound observed recently should continue with the dissipation of election-related uncertainties and the improved foreign exchange buffers accumulated by the central bank.

     

    A combination of economic uncertainty brought about by the upcoming elections and the high demand for foreign exchange has led to an exchange rate path that is slightly deviated from the fundamentals. With strong macroeconomic policy implementation and improved foreign exchange availability, the economy should observe a realignment of the trajectory of the exchange rate with the fundamentals.

     

    “Commercial banks have accumulated enough capital buffers to withstand the effects of the external debt restructuring. The latest macro-prudential risk assessment showed that the impact from the Eurobond restructuring would be minimal, given the preemptive provisioning made by banks to account for potential impairments. Banks are therefore expected to continue to remain stable and support economic growth going forward.

     

    “Inflation projections show a slightly elevated profile driven by high and unstable food prices, pass-through of previous exchange rate pressures, fuel prices and utility tariff adjustments. The price increases in food items have been steep in the course and together with a fast-paced depreciating currency earlier on in the year have altered the inflation trajectory and stalled the disinflation process. At the time of the last MPC meeting, average inflation forecast a year ahead which stood at 19.0 percent has increased slightly to 20.1 percent at this forecast round. The horizon for inflation to get back within the target band of 6 – 10 percent has slightly shifted forward to Q42025 from the original forecast period of Q32025.

     

     

    “In the near-term, strengthening of the currency will augur well for future price developments. Under the circumstances, the Monetary Policy Committee decided to keep the policy rate unchanged at 27 per cent,” the statement said.