BoG Signals Plan to Ease Liquidity Mop-Up in 2026
By Praisebell Rosemond Larbi
The Bank of Ghana (BoG) has indicated that it intends to scale back its liquidity mop-up program in 2026, provided inflation and exchange rate pressures remain contained. The announcement was made in a question-and-answer document released following the latest Monetary Policy Committee (MPC) meeting, which resulted in a 350 basis points cut in the policy rate to 18%.
The Central Bank emphasised that any reduction in liquidity absorption will be undertaken “cautiously and only as macroeconomic conditions permit.” Officials expressed confidence in the ongoing disinflation trajectory and the continuation of fiscal discipline, stressing that maintaining well-anchored inflation expectations remains a key priority. The Bank noted it will use both interest rate policy and liquidity absorption tools to achieve this goal.
Policy Rate Adjustments
Future decisions on the policy rate, the Bank said, will be guided by key economic indicators, including inflation forecasts, core inflation trends, GDP growth, exchange rate movements, money supply dynamics, commodity prices, and developments in the balance of payments.
The Bank described its data-driven approach as aiming “to ensure that headline inflation remains within the medium-term target band of 8 ± 2 per cent while supporting macroeconomic stability.”
In addressing concerns that recent monetary easing could contradict the IMF’s call for a tight stance, BoG maintained that the cuts “are therefore fully consistent with the IMF’s recommendation to maintain a tight monetary policy stance.”
Reviewing the Inflation Target
On calls to revise the inflation target of 8 ± 2% following a faster-than-expected decline in inflation, the Bank dismissed the suggestion. Officials noted that inflation has been at target for only two months, which is insufficient to justify a review. They added that any decision to revise the target downward would be made jointly with fiscal authorities once inflation is firmly anchored within the band for a more sustained period.
Balancing Inflation Control and Market Liquidity
Regarding whether open market operations would be scaled back to avoid destabilising market liquidity, the Bank said it is prepared to ease liquidity absorption only if inflation and exchange rate conditions remain stable. It reiterated its confidence in the disinflation process and fiscal discipline, and reaffirmed that maintaining anchored inflation expectations through a combination of interest rate policy and liquidity management tools will continue to guide its monetary policy decisions.
The announcement signals a cautious but proactive approach by the Bank of Ghana as it seeks to balance support for economic activity with the imperative of price and financial stability heading into 2026.
