Bank of Ghana Cuts Policy Rate to 21.5% as Inflation Eases, MPC Minutes Reveal
The Bank of Ghana has reduced its key lending rate to 21.5 percent, following a 350-basis-point cut approved by four out of six members of its Monetary Policy Committee (MPC). According to minutes from the 126th MPC meeting held between September 15 and 17, 2025, the decision reflects confidence in an improving economy and a continued slowdown in inflation. The policy rate — which guides the cost of credit for businesses and households — is at its lowest since the tightening cycle began.
Committee members cited eight consecutive months of disinflation, with headline inflation falling to 11.5 percent in August 2025, driven by lower food and non-food prices, improved supply conditions, and a stronger cedi. Economic growth also surprised on the upside, with GDP expanding by 6.3 percent in the second quarter of 2025 compared to 5.7 percent in the same period last year. High-frequency indicators such as the Composite Index of Economic Activity and Purchasing Managers’ Index showed ongoing momentum across trade, industry, and services.
The MPC minutes revealed that Ghana’s external position remains robust. A sharp rise in gold and cocoa exports pushed the trade surplus to US$6.2 billion by the end of August, while international reserves stood at about 4.5 months of import cover despite slight drawdowns. However, the cedi lost some of its earlier gains due to higher import demand and reduced remittance inflows, prompting calls for additional measures to stabilise the currency.
While the policy cut aims to ease borrowing costs for the private sector, committee members warned that upcoming utility tariff hikes and exchange rate pressures could slow the disinflation process. Some members argued for a smaller reduction to safeguard recent gains, but the majority felt the economy could absorb a bolder cut without reigniting inflation. The Bank also revised banks’ single currency Net Open Position from ±5 percent to between 0 and –10 percent, effective October 1, to enhance foreign exchange management.
Analysts say the decision signals a pivot toward growth support after years of tight monetary conditions. A lower policy rate is expected to reduce lending rates, encourage private sector credit, and boost output, though the central bank pledged to remain vigilant. The MPC will meet again in November 2025 to reassess the economic landscape and decide whether further easing is warranted.
source: citi newsroom