The Monetary Policy Committee (MPC) of the Bank of Ghana has slashed the policy rate by 350 basis points (3.5 per cent) to 21.5 per cent from 25 per cent, citing the continuous disinflation process.
“So given the current State of macroeconomic conditions, the view of the committee was that inflation will continue to ease in the near term,” Dr Johnson Asiama, the Governor of the Bank of Ghana, said at a press conference.
The 126th MPC evaluated the recent economic developments and assessed risks to the outlook for inflation and growth.
He said in the outlook, headline inflation was expected to drop to within the median term target of 8 plus or minus 2 per cent by the end of the fourth quarter.
He said, contrary to earlier projections of a global economic slowdown, growth had been resilient, supported by modest tapering of the tensions associated with the tariff wars, robust exports in the first quarter of the year, easing credit conditions and fiscal expansion in some advanced economies.
He said the IMF revised its global growth projections for 2025 to 3.0 per cent compared with earlier forecasts of 2.8 per cent.
The Governor said this notwithstanding, geopolitical uncertainties, relatively high tariffs and projected decline in global trade could dampen near-term growth prospects.
“Global inflation is expected to decline amid lower food and energy prices as well as a slowdown in employment growth,” he said.
In addition, global financing conditions have eased somewhat, supported by declining policy rates, lower long-term bond yields, and a strong rebound in portfolio flows to emerging markets and developing economies.
Dr Asiama said, on the domestic front, the economy continued to demonstrate strong growth driven largely by the services and agricultural sectors.
He said the latest release from the Ghana Statistical Service for the second quarter of 2025 showed the economy posting a real GDP growth of 6.3 per cent compared with 5.7 per cent recorded in the same quarter of 2024.
“Now, excluding oil, GDP grew at a much faster pace by 7.8 per cent relative to 5.7 per cent over the same comparative period. The services sector grew by 9.9 per cent while the agriculture sector expanded by 5.2 per cent,” he added.
He said the bank’s high-frequency indicators continued to sustain momentum in economic activity.
The Governor said the consumer confidence index also remained strong despite some softening of the index, while business confidence further picked up as firms met their short-term targets and expressed optimism about company and industry prospects.
On interest rates, he said interest rates were declining in the money market in response to the recent cut in the monetary policy rate, and yields on the money market instruments had declined significantly.
Also, the average lending rates are gradually easing, which should lower the cost of credit in the near term.
He said on the back of the strong external sector performance and increased reserve accumulation, the cedi strengthened against the major trading currencies in the year to July 2025.
However, the cedi came under some demand pressures, bringing the cumulative appreciation through September 12, 2025, to 21.0 per cent against the U.S. dollar.
He said the Committee would continue to monitor macroeconomic developments and take appropriate policy decisions as and when necessary to reinforce the disinflation process.
Source: GNA
Source: ghanabusinessnews.com
