- MPC Unanimously Holds Rate at 14.00% Amid Oil Price and Inflation Risks
The Bank of Ghana has maintained its Monetary Policy Rate at 14.00%, opting for a cautious pause as rising inflation, stronger domestic credit growth and renewed geopolitical tensions complicate the outlook for prices and economic activity.
Governor Dr Johnson Pandit Asiama announced the decision on Wednesday following the conclusion of the Monetary Policy Committee’s 131st regular meeting, held from July 20 to July 22, 2026.
The decision was unanimous.
According to the Governor, the Committee judged that the existing monetary policy stance remained appropriate to guide inflation gradually back into the Bank’s medium-term target band while allowing policymakers more time to assess the domestic implications of the renewed conflict in the Middle East.
“The Committee judged that the current policy stance remains appropriate to guide inflation into the medium-term target band while allowing time to assess the evolving geopolitical developments and their potential impact on the domestic economy,” Dr Asiama said.
The decision comes after Ghana’s headline inflation increased to 5.30% in June 2026 from 3.70% in May, extending the reversal of the sharp disinflation recorded earlier in the year.
Food inflation rose to 3.90% from 3.30%, while non-food inflation climbed more sharply to 6.30% from 4.10%.
Despite the increase, inflation remained below the lower limit of the Bank’s target range of 8.00%, plus or minus 2.00 percentage points.
The Bank attributed the June increase mainly to unfavourable base effects and a temporary rise in transport fares following an earlier surge in crude oil prices.
However, the Governor acknowledged that core inflation and survey-based inflation expectations among consumers, businesses and banks had also increased, although they remained broadly within the target band.
The MPC expects headline inflation to rise gradually towards the target range over the coming months. Potential increases in utility tariffs, persistent instability in global energy markets and further escalation of the Middle East conflict were identified as major upside risks.
Those risks appear to have persuaded the Committee against further monetary easing, even though inflation remains below target and lending rates have fallen significantly.
Crude oil prices rebounded above US$85 per barrel following renewed hostilities and another closure of the Strait of Hormuz. The disruption has raised concerns about energy supplies, shipping routes and global supply chains.
The Bank warned that the persistence of the conflict could slow global economic growth, stall disinflation and compel more central banks to suspend their interest-rate reduction cycles.
The International Monetary Fund projected global growth at 3.00% in July 2026, broadly unchanged from its April projection of 3.10%. However, the Bank said a further escalation of the conflict could weaken the near-term outlook and tighten global financing conditions.
Domestically, the economy continued to record strong growth.
Real gross domestic product expanded by 6.40% in the first quarter of 2026, supported by the services and industrial sectors. The Bank’s Composite Index of Economic Activity recorded annual growth of 13.40% in May, compared with 4.40% a year earlier.
Private-sector credit, international trade, industrial production and tourist arrivals contributed to the improved performance.
Consumer and business confidence also remained positive, supported by expectations of stronger economic growth, relatively low inflation and declining borrowing costs.
Average commercial-bank lending rates declined to 15.60% in June 2026 from 27.00% a year earlier, while the Ghana Reference Rate fell to 10.00% from 23.80%.
The yield on the 91-day Treasury bill also declined to 5.30% from 14.70% over the same period.
Lower credit costs and stronger demand contributed to a sharp expansion in private-sector lending. Nominal private-sector credit grew by 41.20% in June, compared with 8.60% a year earlier, while real private-sector credit increased by 34.10%.
Although the credit expansion is expected to support businesses and broader economic activity, it presents a potential medium-term inflation risk if the increase in lending begins to generate excessive demand.
Monetary aggregates also expanded strongly. Reserve money grew by 31.70% in June 2026, compared with 2.00% in June 2025, reflecting an increase in the central bank’s net foreign assets and changes in banks’ reserve requirements.
Broad liquidity expanded by 28.50%, up from 15.60% a year earlier, largely due to the accumulation of net foreign assets within the banking system.
The banking industry, however, recorded a notable improvement in financial soundness indicators.
Total banking-sector assets increased by 30.70% to GH¢502.40 billion, supported by higher deposits, borrowings and shareholders’ funds.
The industry’s capital adequacy ratio rose to 20.40% in June from 10.60% a year earlier, while the non-performing loan ratio declined to 16.10% from 23.10%.
The Governor cautioned that credit risk remained a significant vulnerability despite the improvement, requiring continued adherence to prudential and regulatory measures.
Ghana’s external sector also delivered a strong performance during the first half of 2026, supported by higher gold and cocoa export earnings.
The country’s trade surplus increased to US$8.80 billion from US$5.80 billion in the corresponding period of 2025, while the current-account surplus expanded to US$5.10 billion from US$4.10 billion.
Gross international reserves stood at US$12.90 billion at the end of June, equivalent to five months of import cover. This was lower than the US$13.80 billion, or 5.70 months of import cover, recorded at the end of December 2025.
The Bank attributed the decline partly to elevated energy-related payments arising from the Middle East conflict but maintained that the current reserve position provided an adequate buffer against external shocks.
The cedi experienced demand pressure in May before recovering, but had depreciated cumulatively by 9.50% against the United States dollar as of July 17, 2026.
The MPC’s decision suggests that the Bank views the recent inflation increase as manageable but no longer considers the environment suitable for further rate reductions.
The hold at 14.00% therefore represents a cautious policy stance: supporting the ongoing economic recovery while guarding against the risk that energy prices, utility adjustments, transport costs and rapid credit expansion could generate a more persistent increase in inflation.
The next MPC meeting is scheduled to begin on September 22, 2026, with the policy decision expected to be announced on September 24.
