- Joe Jackson Urges Patience as Inflation Edges Higher, Says Lending Rates Need Time to Adjust
Ghana’s latest inflation increase should be treated as a warning signal rather than evidence that the economy is sliding back into a high-inflation cycle, Chief Executive Officer of Dalex Finance, Mr Joe Jackson, has said, urging policymakers and businesses to wait for at least one more inflation reading before drawing firm conclusions.
Speaking during a NorvanReports and Economic Governance Platform X Space discussion on Ghana’s inflation outlook, Mr Jackson said the rise in headline inflation from 3.70% to 5.30% appears more dramatic because inflation had previously fallen to unusually low levels.
“When inflation drops this low, every basis-point increase feels much more impactful than it did when inflation was high,” he said. “The latest increase is significant, but the real danger will come if another month records a similarly sharp rise.”
His comments place caution at the centre of Ghana’s current macroeconomic debate. Inflation remains relatively low compared with the extreme levels recorded during the recent economic crisis, but the change in direction has unsettled markets, businesses and households that had begun to expect continued price moderation.
For Mr Jackson, the key issue is not the current level of inflation alone, but whether the upward movement becomes sustained. A one-month rise may reflect temporary pressures. A second or third sharp increase would suggest that inflationary momentum is returning and may require a stronger policy response.
“The outlook is not entirely favourable, but we shouldn’t jump the bridge before we get there. I’m waiting to see the next inflation numbers before drawing stronger conclusions,” he said.
He identified external risks as a major source of uncertainty. These include geopolitical tensions in the Middle East, instability around the Strait of Hormuz, adverse weather conditions and the lingering impact of El Niño on agricultural production.
These risks matter because Ghana remains exposed to imported inflation. A rise in global crude oil prices can quickly affect domestic fuel prices, transport fares, food distribution costs and the prices of imported goods. Similarly, weather disruptions can affect food supply and push up prices even when domestic demand remains weak.
Mr Jackson’s caution therefore reflects the difficulty facing policymakers. If they overreact to one inflation reading, they may tighten policy unnecessarily and slow the recovery. If they ignore early warning signs, they risk allowing inflation expectations to build again.
The same patience, he argued, is needed in the debate over lending rates.
Businesses have been pressing banks to reduce lending rates more aggressively following the sharp decline in inflation and the Bank of Ghana’s earlier policy rate cuts. But Mr Jackson said many businesses underestimate the structural reasons why commercial lending rates decline more slowly than inflation and policy rates.
According to him, banks and other financial institutions do not price loans only on today’s inflation number. They price credit based on expectations about the future, including inflation risk, borrower default risk, funding costs, liquidity conditions and the overall direction of the economy.
“When a bank grants a one-year or two-year loan, it is pricing future uncertainty. Lending rates cannot adjust overnight simply because inflation has fallen,” he said.
That point is central to understanding Ghana’s credit market. A policy rate cut can influence the cost of funds, but it does not automatically translate into cheaper loans for businesses. Banks must first assess whether lower inflation is durable, whether deposit costs are falling, whether borrowers remain creditworthy, and whether macroeconomic stability is strong enough to support longer-term lending.
Mr Jackson noted that lending rates have already declined significantly compared with the height of Ghana’s recent macroeconomic crisis.
“Average lending rates are now moving towards 15.00%. That is remarkable for an economy that, barely 18 months ago, was emerging from a crisis where commercial lending rates exceeded 30.00%,” he said.
His point is that the pace of adjustment may feel slow to businesses, but the direction of travel is already positive. The cost of credit has fallen meaningfully from crisis levels, even if it has not yet reached the level required to unlock stronger private-sector investment.
This creates a difficult balance. Businesses need cheaper credit to expand, invest, hire workers and support growth. But banks need confidence that inflation will remain under control and that borrowers can repay. If lenders cut rates too aggressively before risks are properly priced, they may expose themselves to future loan losses.
Mr Jackson said financial institutions are still dealing with structural rigidities that slow the transmission of lower policy rates into lower lending rates. These include the cost of deposits, perceived credit risk, uncertainty over future inflation and the legacy effects of the recent economic crisis.
“The real question is how we eliminate those rigidities so that lending rates can fall sustainably and support private sector expansion,” he said.
That challenge is particularly important in the context of government’s 24-hour economy agenda. If the policy is to generate meaningful private-sector activity, businesses will need access to affordable and predictable financing. But cheaper credit cannot be achieved sustainably by moral pressure on banks alone.
It will require deeper structural reforms: stronger credit information systems, improved collateral enforcement, lower non-performing loans, more stable inflation expectations, cheaper funding sources, better fiscal discipline and stronger confidence in the macroeconomic outlook.
Mr Jackson’s comments therefore shift the lending-rate debate away from blame and towards market structure. Banks may be slow to adjust, but the reasons are not purely about unwillingness. The broader financial environment still carries risk, and lenders price that risk into credit.
For policymakers, the message is clear. If government wants lending rates to fall faster, it must help reduce the risks that banks price into loans. That means maintaining fiscal discipline, protecting inflation gains, strengthening the credit market and building confidence that the recovery is durable.
For businesses, the message is more measured. Cheaper credit is coming, but the adjustment will not be immediate. The fall from above 30.00% to around 15.00% is significant, but a full normalisation of lending conditions will require time.
“I think we should appreciate how far we’ve come while recognising that the transmission process takes time,” Mr Jackson said.
His intervention comes at a delicate point for the economy. Ghana has made progress in stabilising inflation, restoring confidence and reducing interest rates from crisis levels. But the recent inflation uptick shows that the recovery remains vulnerable to external shocks and domestic expectations.
The question now is whether policymakers can protect stability while creating enough room for businesses to expand.
For Mr Jackson, the answer lies in patience, evidence and structural reform.
One inflation increase is not enough to panic. One policy rate cut is not enough to transform the credit market. And one phase of macroeconomic recovery is not enough to declare the economy fully healed.
Ghana has come far from the crisis period. The task now is to avoid moving too quickly in either direction.
