The Monetary Policy Committee of the Bank of Ghana has kept the lending rate at 28% citing the current level of inflation which “remains high relative to the medium-term target”, despite the positive developments that have happened domestically. The decision to maintain the policy rate was reached unanimously at the MPC’s 124th meeting which concluded on Friday, May 23.
The Committee is however optimistic that inflation will see a significant drop to the medium-term target of single digit in the first quarter of 2026 barring unanticipated shocks. However, in order for the economy to see a continuous decline in inflation it will have to maintain a tight stance.
“The latest forecast points to continued easing of inflationary pressures on the back of tight monetary policy stance, exchange rate stability, and fiscal consolidation. Inflation is expected to ease faster towards the medium-term target in the first quarter of 2026 as opposed to the second quarter as earlier envisaged, barring unanticipated shocks.”, BOG said in a statement
Headline inflation has seen a consecutive decline in the first four months of 2025 by 2.6 percentage points to 21.2% in April. A confluence of factors including tight monetary policy stance, stepped-up liquidity sterilization efforts, downward revisions in ex-pump petroleum prices, and exchange rate stability have supported the gradual decline in inflation; backed by the BOG’s core inflation measure which also points to easing inflationary pressures.
The Ghanaian central bank also presented a bullish outlook on economy activity with reference to its updated composite index of economic activity which saw an increase by 2.3% year-on-year in March 2025, compared with 1% over the same period last year, mainly driven by exports, credit to the private sector, and construction activities. The Bank added, “the Ghana Purchasing Managers’ Index rose above the 50-benchmark as output and new orders increased, signaling improved growth prospects. Based on easing inflationary pressures and optimism about macroeconomic conditions, the latest confidence surveys showed significant improvement in consumer and business indices, the highest in the last seven years.”
Other additional policy measure that was introduced by the MPC at its meeting was to amend the Dynamic Cash Reserve Ratio for all banks to be maintained in their respective currencies, meaning foreign currency deposits are to be kept into foreign currency reserves and domestic currency deposits are to be kept into domestic currency reserves. This policy takes effect on June 5, 2025.