Fitch Solutions Expects BoG to Hold Policy Rate at 28% in July, Sees Prime Rate Easing from September
Fitch Solutions expects the Bank of Ghana (BoG) to maintain its benchmark policy rate at 28% at its upcoming July meeting, despite mounting evidence of a disinflationary trend and growing calls for monetary easing. The research arm of Fitch Ratings cited policymakers’ likely preference for stronger confirmation of a sustained decline in inflation before embarking on a rate-cutting cycle.
The central bank stunned markets with a surprise 100-basis-point hike in March, citing persistent inflationary pressures. However, Fitch now projects that the BoG will begin cutting rates from September, should current macroeconomic conditions hold.
“While our baseline view remains that the BoG will keep rates unchanged in July, a rate cut cannot be ruled out,” Fitch said in a recent note. “The faster-than-expected disinflation, combined with stable exchange rate dynamics and subdued global energy prices, opens the door for earlier-than-anticipated policy easing.”
Should policymakers opt to reduce rates as early as this month, Fitch estimates the benchmark rate could end the year in the range of 24–25%, well below its current forecast of 26%.
Headline inflation dropped sharply to 13.7% in June, significantly narrowing the spread with the policy rate. The central bank’s current stance places real interest rates at a steeply positive level, one of the highest across African frontier markets.
Ghana’s disinflationary momentum has been supported by a stabilising currency and a robust external sector. The cedi has remained broadly stable since May, underpinned by rising international reserves, which stood at $7.9bn in April, equivalent to nearly four months of import cover. The reserve build-up has been driven by strong gold exports and favourable global gold prices, amid heightened geopolitical risks and sustained central bank demand for the metal.
“The authorities’ clear preference for exchange rate stability further reinforces the outlook for continued disinflation, as currency pass-through to prices diminishes,” Fitch noted.
Domestic economists urge policy recalibration
Commenting on the BoG’s policy posture, Professor Godfred Bokpin, a finance and economics professor at the University of Ghana Business School, argued that the gap between the headline inflation rate and the central bank’s benchmark rate is now too wide to justify further tightening.
“With inflation now at 13.7% and the policy rate still at 28%, the real interest rate is excessively high,” Prof Bokpin said. “A 3 to 5 percentage points cut would be consistent with both the inflation trend and the need to stimulate credit growth.”
While the BoG has remained cautious in light of Ghana’s IMF programme benchmarks and inflation volatility, the improving macroeconomic backdrop is likely to intensify pressure for rate reductions in the second half of 2025. However, the timing and pace of any monetary easing will hinge on continued FX stability, energy price trends, and fiscal discipline.
The central bank’s next Monetary Policy Committee decision is scheduled for later this month.
