The Bank of Ghana has stepped up its transition from economic stabilisation to growth support, cutting its benchmark policy rate to 14% in a bold move aimed at unlocking credit and accelerating private sector activity.
The 150 basis points reduction—announced after the Monetary Policy Committee’s 129th meeting from March 16 to 18—marks the second consecutive easing in 2026, bringing total cuts in the first quarter to 400 basis points.
The shift underscores a growing confidence within the central bank that inflation has been sufficiently tamed to allow a pro-growth stance.
Governor Johnson Asiama said the decision reflects a strategic pivot toward boosting economic activity while maintaining vigilance over emerging global risks.
“We are seeing room to support growth without undermining price stability,” he indicated, pointing to sustained improvements in key macroeconomic indicators.
From inflation fight to growth support
The rate cut comes on the back of a sharp decline in inflation, which fell to 3.3% in February 2026 from 5.4% in December 2025. The consistent disinflation—now stretching over 14 months—has been driven by earlier tight monetary policy, a stronger cedi, and improved food supply.
With inflation expectations firmly anchored, the central bank is now turning its focus to reducing borrowing costs and stimulating investment.
Already, the impact is visible. Lending rates have dropped significantly to 19.2% from over 30% a year ago, while Treasury bill yields continue to decline, easing pressure on businesses and households.
Economy shows strong rebound signals
Ghana’s economy is entering this easing phase from a position of strength. Data from the Ghana Statistical Service shows real GDP growth hit 6% in 2025, with non-oil sectors—especially services and agriculture—driving expansion.
Early 2026 indicators suggest the momentum is holding. The Bank’s Composite Index of Economic Activity recorded an 8.4% growth in January, supported by rising trade, industrial output, and consumer demand.
Improving confidence levels among businesses and consumers further reinforce the case for policy easing, as optimism about economic prospects continues to rise.
Credit still lagging despite easing
Despite falling interest rates, private sector credit growth remains relatively subdued—a key concern the central bank is now targeting.
According to the Governor, the rate cut is intended to “unlock lending” and encourage banks to extend more credit to businesses, particularly in productive sectors.
The banking sector itself is showing signs of recovery, with non-performing loans declining and total assets expanding, reflecting improved financial stability.
Fiscal and external buffers strengthen outlook
Ghana’s improving fiscal discipline has also created space for monetary easing. The fiscal deficit narrowed sharply to 1.0% of GDP in 2025, while public debt dropped to 45.3%, signalling stronger macroeconomic management.
On the external front, a widening trade surplus and rising reserves—now at $14.8 billion—have strengthened the country’s buffer against shocks, giving policymakers additional confidence.
Global risks remain a threat
However, the central bank remains cautious. Rising geopolitical tensions, particularly in the Middle East, pose risks through higher oil prices and potential disruptions to global financial markets.
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These external uncertainties could complicate the outlook, but the Bank maintains that current domestic gains provide enough room to cautiously ease.
Policy direction: cautious but pro-growth
The latest rate cut signals a clear shift in policy direction—from crisis containment to economic expansion.
While risks persist, the central bank appears ready to sustain its easing cycle if inflation remains under control, positioning the economy for stronger growth driven by investment, consumption, and improved credit flow.
