Possible Policy Rate Cut in Early 2026 as Economic Conditions Improve — MPC
By Praisebell Rosemond Larbi
Ghana’s Monetary Policy Committee (MPC) is signalling the possibility of additional policy easing in early 2026, following positive assessments of inflation trends, credit conditions, and the broader economic environment during its November 2025 deliberations. Insights from members suggest that the Bank of Ghana may be preparing to shift gradually toward a more accommodative policy stance if current macroeconomic gains are sustained.
Falling Inflation and High Real Interest Rates Influence Policy Thinking
One of the dominant themes from the November discussions was the continued moderation in headline inflation. Members noted that inflation has declined consistently for ten consecutive months, aided by a stable cedi, easing global commodity pressures, particularly on food and fuel, and more firmly anchored inflation expectations among businesses and consumers.
Despite these gains, the Committee acknowledged that real interest rates remain significantly elevated due to the pace of disinflation. This means that even though nominal policy rates have been reduced in recent quarters, the gap between inflation and the policy rate remains wide, tightening financial conditions for the private sector. Several MPC members expressed concern that the high real rate environment risks dampening investment, suppressing private-sector credit expansion, and slowing the broader recovery.
These dynamics, they indicated, provide a window for additional policy easing if upcoming data confirms the disinflation path.
Stronger External and Domestic Fundamentals Enhance Confidence
The Committee also highlighted notable improvements in Ghana’s external position. International reserves have been rising steadily, supported by favourable trade balances and continued inflows from development partners. At the same time, the current account deficit has been narrowing, reducing pressure on the exchange rate and strengthening the overall macroeconomic outlook.
Domestically, members pointed to steady GDP growth, increasing business confidence, and early signs of recovery in bank lending. Commercial banks are beginning to expand credit again following the balance-sheet repair associated with the domestic debt exchange. This improving risk appetite within the financial sector is considered an important signal of stabilising economic conditions.
Collectively, these developments give the Committee greater assurance that the economy may be able to withstand a moderate reduction in policy rates without triggering exchange rate instability or undermining monetary discipline.
Policy Outlook: January 2026 Meeting Could Be a Turning Point
Many MPC members hinted that should inflation continue its projected downward glide toward the end of December 2025, the Committee could consider another rate cut during its January 2026 meeting. Such a move would help align the monetary policy stance more closely with market conditions, lower borrowing costs, and reinforce the recovery trajectory in key sectors such as manufacturing, services and construction.
Forward guidance from the Committee suggests a cautious but clearly emerging bias toward easing. This represents a shift from the tight monetary policy posture maintained through 2023 and 2024, when inflation pressures and exchange rate volatility dominated policy concerns.
Balancing Risks While Supporting Growth
Despite the broadly positive tone, some members urged vigilance, particularly regarding external shocks such as global oil price volatility, geopolitical risks, or unexpected tightening in global financial conditions. They also emphasised the importance of fiscal discipline to ensure that monetary easing does not coincide with destabilising fiscal pressures.
Nevertheless, the overall sentiment from the November deliberations points to cautious optimism. With inflation easing, credit conditions improving, and both domestic and external fundamentals stabilising, the MPC appears increasingly prepared to use monetary policy to accelerate Ghana’s economic recovery heading into 2026.
