Bank of Ghana delivers first cut in almost a year

Interest rates slashed at record pace in July: At its 28–30 July meeting, the Bank of Ghana (BOG) slashed its benchmark interest rate by 300 basis points to 25.00%, the largest cut on record. The cut was the Bank’s first since September 2024 and matched expectations of rate reductions, though the market had underestimated its size.

Accelerated disinflation and steady growth drive the decision: The Bank of Ghana justified its decision by highlighting the ongoing disinflationary trend. Since the BOG’s last meeting in May, inflation continued its downward trajectory, reaching its lowest level since December 2021 in June. Additionally, the BOG’s inflation outlook improved: the Bank projects headline inflation to return to its 6.0–10.0% medium-term target range by the end of 2025. Moreover, inflation expectations are now broadly anchored, leaving room for cuts. Regarding activity, the Bank cited robust growth in the first quarter of 2025 and sustained economic activity through May, with survey data revealing improved economic sentiment over the same period. Finally, external buffers also improved, supported by higher trade and current account surpluses, rising international reserves and a stronger cedi in the face of heightened global uncertainty.

Further cuts hinge on continued disinflation: Regarding future monetary policy decisions, the Bank announced that further reductions were likely this year, hinging on continued disinflation. In line with the statement, nearly all of our panelists have penciled in rate cuts ranging from 150–700 basis points by year-end. The Bank will reconvene on 15–17 September.

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