KEY POINTS
- Ghana’s inflation has declined to 13.7% while the cedi stabilises, prompting calls from the banking sector for a central bank review of the monetary policy rate.
- The Ghana Reference Rate, currently at 28%, would likely fall with any MPR cut, leading to reduced commercial lending rates and improved business conditions.
- The upcoming MPC meeting on July 28 is pivotal, with analysts forecasting meaningful interest rate adjustment, albeit with caution to prevent inflation or currency setbacks.
As the Ghanaian cedi stabilizes and inflation continues its downward trajectory, hopes of a forthcoming interest rate cut are gaining momentum among banking and economic circles.
Speaking at the 11th Absa‑UPSA Law School quarterly banking roundtable in Accra, John Awuah, Chief Executive Officer of the Ghana Association of Banks, identified the upcoming Monetary Policy Committee meeting on July 28, 2025, as decisive for rate direction.
“We have seen where we are now – where inflation is at 13.7 per cent and we hold the view that the central bank has to take a second look at the monetary policy rate,” he stated, indicating growing confidence in the central bank’s willingness to act.
He highlighted that the Ghana Reference Rate (GRR)—a composite benchmark influencing bank lending rates—is calculated based on the monetary policy rate (MPR), interbank and treasury bill rates, and current inflation levels.
“We have T‑bill rate at 14.14 per cent, and inflation at 13.7 per cent. So, if we have the MPR also move in the direction southwards, definitely, we will also do something about the lending rate,” he explained, reinforcing the link between MPR adjustments and commercial borrowing costs.
Stabilising cedi and inflation metrics lay groundwork for lending cost relief
Awuah underscored that a downward shift in the MPR would naturally trigger a reduction in lending rates, referencing the current high GRR of 28 percent as a major factor in business borrowing expenses.
“If the policy rate moves in directions southwest, definitely we are going to have a kind of reduced lending rate,” he added, projecting benefits for enterprises struggling under tight financial conditions.
The roundtable also featured UPSA Law School Dean Ernest Kofi Abotsi, who described the event’s theme—“Ghana’s Legal Tender, Monetary Policy, and the Rising Cedi”—as an effort to elucidate macroeconomic changes, aid business planning and strengthen regulatory frameworks following recent banking sector challenges.
To reinforce the narrative, senior economists at Absa Bank have projected inflation easing below 13 percent by year‑end, contingent on sustained currency stability and effective fiscal discipline. Additionally, market analysts anticipates that a modest 50 basis‑point MPR cut could reduce average commercial lending rates by 100–150 basis points, providing relief to SMEs and consumers alike.
However, stakeholders urged caution: any rate adjustment must be accompanied by vigilant oversight to contain inflationary rebounds and currency volatility, especially in light of projected e‑lection‑related fiscal strains heading into 2026.
