The Bank of Ghana (BoG) has reduced its benchmark policy rate by 150 basis points to 14%, marking the second consecutive cut in 2026 as authorities move to consolidate macroeconomic gains while supporting growth in an increasingly uncertain global environment.

The latest decision by the central bank’s Monetary Policy Committee (MPC), announced at the end of its 129th meeting held from March 16 to 18, follows an earlier reduction in January when the rate was lowered from 18% to 15.5%.

The cumulative 400 basis points cut within the first quarter signals a deliberate shift toward easing monetary conditions after a prolonged period of tight policy.

Balancing growth and inflation risks

Addressing a press conference on March 18, Governor of the Bank of Ghana, Dr Johnson Asiama, said the decision reflects a careful balancing of domestic economic recovery with emerging global risks, particularly geopolitical tensions in the Middle East.

According to him, while Ghana’s inflation outlook remains broadly favourable, external uncertainties—especially rising crude oil prices linked to the conflict—pose potential upside risks.

“Rising geopolitical tensions in the Middle East have deepened uncertainty in the external sector,” he stated.

“The Bank’s latest forecast suggests that headline inflation will remain within the medium-term target. However, upside risks include the likely pass-through of higher crude oil prices and escalating geopolitical tensions.”

Despite these risks, the MPC concluded that prevailing economic conditions provide sufficient room for further easing.

Domestic indicators support rate cut

The Governor explained that the Committee’s decision was underpinned by improving domestic macroeconomic indicators, including subdued credit growth and declining levels of non-performing loans in the banking sector.

“The Monetary Policy Committee has considered the current economic conditions, including subdued credit growth and declining non-performing loans, and decided that a reduction in the policy rate is appropriate to stimulate lending and investment,” he said.

He added that the central bank’s objective remains to ensure financial system stability while enabling households and businesses to access more affordable credit.

“This cut is expected to ease borrowing costs and promote economic activity,” he noted.

Inflation drops sharply to 3.3%

A key factor supporting the rate cut is Ghana’s sustained disinflation trend. Headline inflation declined significantly to 3.3% in February 2026, down from 5.4% in December 2025.

The decline was driven by both food and non-food components, while core inflation—which excludes energy and utility prices—also moderated, indicating subdued underlying price pressures.

The central bank attributed the 14-month disinflation trend to tight monetary policy, appreciation of the cedi, and improved food supply conditions.

Inflation expectations among consumers, businesses and financial institutions have also remained well anchored.

Strong economic growth momentum

Data from the Ghana Statistical Service shows that the economy maintained a strong growth trajectory in 2025.

Real GDP expanded by six percent, up from 5.8% in 2024, while non-oil GDP growth accelerated sharply to 7.6% from 6.1 percent, driven largely by the services and agriculture sectors.

High-frequency indicators suggest that this momentum has carried into 2026.

The Bank’s Composite Index of Economic Activity recorded annual growth of 8.4% in January 2026, compared to six percent in the same period of 2025.

This improvement was supported by increased private sector credit, higher industrial output, expanding trade activity, and stronger consumption by households and businesses.

Improved confidence among consumers, businesses

Confidence levels across the economy have also strengthened.

Surveys conducted by the Bank in February 2026 indicate rising consumer optimism, driven by easing inflation and improved expectations about future economic conditions.

Business confidence has similarly improved, reflecting stronger operational performance and positive outlooks for industry growth.

Interest rates and credit conditions easing

Monetary conditions have begun to ease in line with falling inflation.

Interest rates on short-term government securities declined sharply in the first two months of 2026.

The yield on the 91-day Treasury bill dropped significantly, while average bank lending rates fell to 19.2% in February 2026 from 30.1% a year earlier.

This decline in lending rates has begun to translate into a gradual recovery in private sector credit, although overall credit growth remains relatively subdued.

Money supply growth slows sharply

Monetary aggregates also reflect tighter financial conditions in the recent past.

Reserve money contracted by 0.5 percent year-on-year in February 2026, a sharp reversal from the 68.8% growth recorded a year earlier.

Broad money supply growth similarly slowed to 16% from 33.1% over the same period.

These trends highlight the impact of earlier tight monetary policy, which helped to stabilise inflation but also constrained liquidity growth.

Fiscal discipline improves outlook

On the fiscal front, provisional data for 2025 points to improved discipline.

The overall fiscal deficit on a commitment basis narrowed to 1.0 percent of GDP, significantly below the budget target of 2.8%.

The primary balance recorded a surplus of 2.6% of GDP, exceeding the target of 1.5%.

Public debt levels also declined sharply, with the debt-to-GDP ratio falling to 45.3% at the end of December 2025, down from 61.8% a year earlier.

Banking sector shows resilience

The banking sector remains stable and well-capitalised, according to the central bank.

Total assets increased significantly, driven by growth in deposits, borrowings and shareholder funds.

Investments surged by 57.5% in February 2026, compared to 8.6% growth a year earlier.

Asset quality also improved, with the non-performing loan (NPL) ratio declining to 18.7% from 22.6% over the same period. However, the Bank noted that NPLs remain a key risk and pledged continued regulatory action to address them.

External sector strengthens further

Ghana’s external sector has also recorded notable gains.

The trade surplus widened to US$3.7 billion in the first two months of 2026, up from US$2.1 billion in the same period of 2025, supported by higher gold export earnings and moderate import growth.

Gross International Reserves rose to US$14.8 billion, equivalent to 5.8 months of import cover, compared to US$13.8 billion (5.7 months) at the end of 2025.

The central bank expects further reserve accumulation under the Ghana Accelerated National Reserve Accumulation Programme, which aims to increase import cover to 15 months by 2028.

Global risks cloud outlook

Despite the strong domestic performance, the global environment has become increasingly uncertain.

The Middle East conflict has disrupted supply chains, increased oil price volatility and raised concerns about global financial stability. While global inflation has generally declined, the recent surge in crude oil prices could reverse some of these gains and prompt tighter monetary policy in advanced economies.

Such developments could tighten global financing conditions and weigh on growth prospects, particularly for emerging economies like Ghana.

Policy outlook remains cautious

In its assessment, the MPC acknowledged these external risks but concluded that the strength of Ghana’s macroeconomic fundamentals and high real interest rates provide room for further easing.

Consequently, the Committee reduced the policy rate to 14 percent, signalling confidence in the inflation outlook while prioritising economic expansion.

The central bank emphasised that it will continue to closely monitor global developments, particularly the evolving situation in the Middle East, and stands ready to take further policy actions if necessary to safeguard price stability.

The latest rate cut underscores a pivotal moment in Ghana’s economic recovery—one where improving domestic conditions are allowing policymakers to cautiously pivot from stabilisation toward growth, even as external uncertainties loom large.