BoG credits economic recovery, lower inflation for 21.5% rate cut
By Nii Trebi Hammond
The Bank of Ghana (BoG) has released the full minutes of its 126th Monetary Policy Committee (MPC) meeting, detailing the reasoning behind the recent cut in the policy rate by 350 basis points to 21.5 per cent.
The decision, taken between 15 and 17 September 2025, saw four of the six committee members vote in favour of the reduction.
According to the minutes, the majority view was influenced by signs of an improving domestic economy, a more stable outlook and a sustained decline in inflation.
The Committee noted that although the global economic environment remains uncertain, Ghana’s domestic macroeconomic indicators have strengthened.
“Domestic macroeconomic developments continued to improve and have broadened, with a positive outlook. Economic activity picked up further in the second quarter, with indications of continuing strong activity in the third quarter, underscored by improved confidence,” one member said, referencing data from the Ghana Statistical Service which showed a 6.3 per cent GDP growth in the second quarter of 2025, up from 5.7 per cent in the same period last year.
Inflation has also been on a steady decline, easing for the eighth consecutive month to reach 11.5 per cent in August 2025. Members attributed this to a combination of prudent monetary policy, fiscal consolidation, improved food supply and stronger external payments.
“The downside risks outweigh the upside risks, suggesting that the disinflation process is set to continue,” a member observed.
The minutes further revealed strong performance in the external sector, with higher export earnings from gold and cocoa boosting reserves despite recent pressures on the Ghana cedi.
“The strong buffers along with a prudent monetary policy stance, strong cedi liquidity management and sustained fiscal consolidation should support the disinflation process,” another member stated.
However, the Committee also acknowledged risks to the outlook, including potential utility tariff adjustments, renewed pressures on the exchange rate and uncertainty in global trade policy.
Despite these, the majority felt that the time was right to recalibrate monetary policy to ease conditions for the real sector.
“The current developments provide scope for a recalibration of the monetary policy stance to provide some respite to the real sector of the economy since the output gap remains negative,” one member argued, adding that cutting the policy rate would help reduce borrowing costs and stimulate private sector credit.
While four members voted for a 350-basis-point cut to 21.5 per cent, two opted for a more cautious reduction of 300 basis points to 22 per cent, citing the need to balance easing with the risks of inflationary pressures and currency depreciation.
Overall, the MPC concluded that Ghana’s economic outlook remains positive, with resilience in growth, declining inflation and a robust external payments position providing the space for monetary policy easing.
The Bank of Ghana said the next Monetary Policy Committee meeting will take place in November 2025, when the next policy rate decision will be announced.
