???? BoG Cuts Policy Rate Sharply to 25% – A Record Move by the MPC
On July 30, 2025, Ghana’s MPC lowered its policy rate from 28% to 25%—the largest single cut in the Bank of Ghana’s history. The decision reflects falling inflation, improved macroeconomic conditions, and restored confidence, with more cuts likely if disinflation continues.
Accra, July 30, 2025 – At its latest meeting in Accra, the Monetary Policy Committee of the Bank of Ghana announced a drastic cut of 300 basis points, reducing the policy rate from 28% to 25%. The majority of the MPC members supported the move, marking the boldest interest rate reduction on record for Ghana
Governor Dr. Johnson Asiama attributed the decision to several key improvements:
-
Inflation has dropped to 13.7% in June, down sharply from 18.4% in May, reaching its lowest level since December 2021
-
Macroeconomic conditions have strengthened, including external buffers, currency appreciation (cedi up over 40% year-to-date), and rising consumer and business confidence
-
The central bank remains committed to its price stability mandate, while fostering inclusive and sustainable growth .
???? Why the Cut Now?
The move signals Ghana’s confidence in its ongoing disinflationary trend. Analysts had expected a more gradual 200‑basis‑point reduction to 26%, but the MPC opted for a more aggressive approach, citing anchored inflation expectations and macroeconomic resilience .
Professor Patrick Asuming from the University of Ghana raised concerns over the timing, arguing that a more cautious stance—such as a smaller cut or a hold—might have been prudent to assess whether inflation gains are durable . Despite this, understanding remains that disinflation momentum appears sustained.
✅ Expected Impacts and Outlook
| Area | Potential Effect |
|---|---|
| Borrowing Cost | Lower short-term rates for businesses and consumers |
| Economic Recovery | Supports credit expansion now that inflation is cooling |
| Investor Confidence | Reinforces macro stability perception |
| Locational Risks | Utilities tariff hikes and global trade tensions may offset gains |
The MPC also hinted at further rate reductions in upcoming meetings, pointing to potential cuts that could bring the rate closer to 18% by year-end if disinflation continues at its current pace .
???? Broader Context
The move builds on the momentum from an emergency MPC session in mid-July, where no rate change was taken, but future recalibration was flagged in light of improving fundamentals such as a $5.6 billion trade surplus and a $3.4 billion current account surplus .
???? Bottom Line
Ghana’s MPC has delivered a decisive monetary policy shift, trimming its benchmark rate to 25%—the most substantial cut in its history. With inflation retreating and macro conditions improving, the move paves the way for sustained economic recovery, though risks remain. The central bank’s readiness to act further reflects a data-driven, confidence-based approach to policy normalization.
What's Your Reaction?
