Ghana’s central bank has reduced its benchmark interest rate to 18 percent, the lowest level in almost four years, after a sustained decline in inflation placed price growth firmly within the bank’s target band and strengthened confidence in the country’s economic outlook.
Disinflation creates room for monetary easing
The Bank of Ghana’s latest rate decision follows a significant and rapid fall in consumer inflation, which has eased to levels not seen in several years. After a period of sharp price increases driven by global commodity shocks and domestic cost pressures, inflation has stabilised, giving policymakers renewed confidence to support economic activity without undermining price stability. The central bank emphasised that the current trajectory suggests inflation will remain broadly contained through 2026, creating an environment conducive to lower borrowing costs.
Cedi strengthens alongside rising foreign-exchange reserves
The rate cut comes as the Ghanaian cedi continues to appreciate against major currencies, supported by improving foreign-exchange reserves and a more favourable balance of payments. Higher reserve levels have provided a buffer against external volatility, while stronger currency performance has helped moderate the cost of imports, easing additional pressure on consumer prices. These gains have contributed to a more stable macroeconomic backdrop and reinforced positive sentiment among investors.
Cooling of gold rally provides additional relief
Gold — one of Ghana’s most important export commodities — saw a strong rally earlier in the year, boosting government revenues and improving external accounts. As global gold prices have gradually cooled, domestic inflationary pressures have also eased. The moderation in gold-driven liquidity has helped balance the economy and reduce overheating concerns, allowing the central bank to shift focus toward providing monetary support for growth.
Lower interest rates to support credit expansion and business confidence
With the policy rate now significantly reduced, businesses and households are expected to benefit from more accessible credit. Lower borrowing costs could support investment, expand access to finance and stimulate economic activity across key sectors. Policymakers believe the improved inflation outlook gives banks the confidence to increase lending, though the pace at which lower policy rates translate into real-economy credit remains a key challenge.
Risks remain as Ghana enters new phase of recovery
Despite the positive momentum, the central bank has warned that strong policy coordination remains essential. Weak demand for government securities, uneven transmission of interest-rate cuts and global uncertainty all pose risks to the outlook. A sustained recovery will depend on continued fiscal discipline, stable commodity markets and improved private-sector confidence.
Newshub Editorial in Africa – 2025-11-28
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