Economist Warns Bank of Ghana’s Aggressive Rate Cut Risks Inflation Amid Rising Utility Tariffs

Economist Professor Patrick Asuming has cautioned the Bank of Ghana (BoG) over its latest policy decision, describing the central bank’s 350-basis-point rate cut as “too aggressive” given looming hikes in utility tariffs. He warned that the move, while aimed at stimulating growth, could undo recent progress in bringing inflation under control.

The BoG’s Monetary Policy Committee (MPC) on Monday reduced the benchmark policy rate from 25% to 21.5%, citing a sustained decline in inflationary pressures. The cut is one of the largest in recent years and is intended to ease borrowing costs for businesses and households, thereby boosting economic activity.

However, speaking to Citi News on Wednesday, September 17, 2025, Prof. Asuming argued that the decision was premature. “Personally, I think that it is quite aggressive. Even if there was going to be a cut, considering that at the previous meeting there was a substantial cut, I would have thought that if there was going to be a cut, it would be rather moderate,” he said.

The economist explained that anticipated increases in electricity and water tariffs could reintroduce inflationary pressures, undermining the benefits of a sharp rate reduction. He warned that such developments could force the BoG to tighten policy again sooner than expected, which would disrupt business confidence and financial planning.

While the policy rate cut is expected to stimulate credit and support economic growth, analysts share Prof. Asuming’s concerns about its timing. They caution that the central bank may be underestimating short-term risks to price stability, particularly as Ghana grapples with cost-of-living pressures and rising utility bills.

source: citi newsroom