The Bank of Ghana (BoG) has cut its benchmark interest rate by 300 basis points to 25%, marking its first rate reduction since September 2024, as inflation slows and macroeconomic conditions show marked improvement.
Johnson Asiama, BoG governor, announced the decision on Wednesday, following the July meeting of the Monetary Policy Committee (MPC), where a majority of members supported the easing of the rate.
“Macroeconomic conditions have significantly improved. Inflation expectations are broadly anchored. External buffers have strengthened, and confidence in the economy is returning,” Asiama said to reporters.
“Given these considerations, the MPC, by a majority decision, voted to lower the monetary policy rate by 300 basis points to 25.0%,” it added.
Headline inflation fell for a sixth consecutive month in June to 13.7%, supported by improved food supply, a stronger currency, and tighter fiscal control. The cedi has appreciated sharply, gaining 40.7% against the US dollar in July, underpinned by a robust external position and rising investor confidence.
Fiscal consolidation also appears to be taking hold. According to the central bank, Ghana recorded a budget deficit of 0.7% of gross domestic product (GDP) in the first half of 2025, outperforming the official target of 1.8%.
“Data on budget execution indicated a strong commitment to fiscal consolidation as expenditures adjusted within set targets to accommodate the revenue shortfalls during the first half of 2025,” the MPC noted.
Public debt has declined significantly, falling to 43.8% of GDP as of mid-2025 from 61.8% in December 2024 — a shift analysts see as a sign of improving debt sustainability.
Forward-looking guidance suggests further disinflation is expected.
The central bank projects that headline inflation will fall within its 6–8% target range by the end of 2025, earlier than previously anticipated.
Despite the positive outlook, the BoG flagged risks linked to global trade tensions and potential adjustments in domestic utility tariffs. However, it believes these pressures will be outweighed by strengthening local conditions.
The BoG added that it will continue to monitor economic conditions closely and may implement further rate cuts if disinflation persists.
The return to monetary easing was widely anticipated by market analysts, following a strong macroeconomic performance in the H1 2025.
In an interview ahead of the meeting, Benjamin Boachie, chief Economist at Secondstax, said: “Well, my hunch is that they may cut simply because the data is very positive. The inflation fight has been largely successful… you’re in a scenario where all of these other metrics are coming in positive, [and] there is a significant flow of capital back into the country.”
Standard Bank Ghana also forecasted a substantial reduction. “We at Standard Bank believe that the conditions are ripe and we see a potential cut of 200 to 300 basis points in the policy rate,” said Karen Kwarteng, Head of Global Market Sales.
The next policy meeting is scheduled to hold between September 15 and 17.
