Easing Inflation Pressures Forces Central Bank to Cut Benchmark Interest Rate to 25%

Easing Inflation Pressures Forces Central Bank to Cut Benchmark Interest Rate to 25%

The Monetary Policy Committee (MPC) of the Bank of Ghana has cut the benchmark monetary policy rate by 300 basis points to 25%, down from the previous rate of 28%, marking one of the most significant reductions in recent years.

Announcing the new rate at the 125th MPC press briefing in Accra, Governor of the Central Bank, Dr Johnson Asiama, attributed the rate cut to the continued decline in headline inflation and improvements in the macroeconomic environment.

“Overall, the Committee noted that macroeconomic conditions have significantly improved, inflation expectations are broadly anchored, external buffers have strengthened, and confidence in the economy is returning. The July forecast also shows that headline inflation is expected to decline further in the third quarter of 2025 and trend within the medium-term target of 8±2 percent by the end of 2025, earlier than initial projections. However, there are upside risks to the inflation outlook, which include potential supply chain challenges emanating from the global trade tensions, and upward adjustment in utility tariffs,” he stated.

“This notwithstanding, the impact of these risks on inflation is expected to be offset by appropriately tight monetary policy stance and continued fiscal consolidation. Given these considerations, the Committee, by a majority decision, voted to lower the Monetary Policy Rate by 300 basis points to 25.0 percent. Looking ahead, the Committee will continue to assess incoming data and likely reduce the policy rate further, should the disinflation trend continue,” he added.

Ghana’s inflation rate currently stands at 13.7%, a notable drop from earlier levels, signalling the effectiveness of recent monetary and fiscal policy coordination in stabilising prices.

The reduction in the policy rate is expected to ease lending conditions in the economy, potentially lowering borrowing costs for businesses and households. It also reflects growing market confidence in the disinflation process, amid relative stability in the foreign exchange market and improved fiscal discipline.

Analysts say the move by the BoG could spur private sector investment and support ongoing economic recovery efforts.

The MPC is expected to continue monitoring inflation dynamics and make further adjustments as necessary to support the Bank’s price stability mandate.