Business
BoG Opts for Steady Rates While Inflation Continues to Fall
The Monetary Policy Committee (MPC) of the Bank of Ghana is set to make a crucial decision on the country’s benchmark interest rate at its 124th meeting. In a cautious approach, the committee is expected to hold steady at 28 per cent, opting for prudence over hasty rate cuts.
According to GCB Capital’s Economic and Market Insight analysis, this measured stance will allow the MPC to closely monitor the economy’s progress, particularly with headline inflation currently below 20 per cent.
As the economic landscape continues to evolve, the MPC may signal a potential gradual rate reduction by the third quarter of 2025, contingent on sustained disinflation trends, currency stability, and fiscal discipline.
A rate cut in Q3 2025 could provide a much-needed boost to the economy, but it hinges on the Bank of Ghana’s ability to maintain a delicate balance between growth and inflation control. With fiscal policy and foreign exchange markets playing a critical role, the MPC’s decision will be closely watched by stakeholders and market analysts alike.
However, potential upside risks such as rising fuel prices, depreciation of the cedi or trade tensions could postpone any easing. Conversely, a more rapid disinflation could accelerate this timeline.
Nonetheless, if a rate-cutting cycle does occur, nominal interest rates are likely to decline, which would lower borrowing costs and potentially stimulate economic activity.
However, caution is warranted as any premature easing of policy could trigger a resurgence of inflation, jeopardising the recent progress in price stability.
Headline inflation
Headline inflation has been steadily declining since its peak, with the April figure of 21.2 per cent indicating progress, yet it remains significantly above the central bank’s target range of 8±2 per cent.
The current policy rate of 28 per cent continues to exceed inflation, demonstrating the Monetary Policy Committee’s (MPC) commitment to anchoring expectations.
However, with the real policy rate of 28 per cent compared to the 21.2 per cent inflation has reduced the urgency for further tightening.
The continued decline in inflation to 21.2 per cent, the fourth consecutive monthly drop, signals a gradual easing of inflationary pressures.
However, with the Monetary Policy Rate (MPR) elevated at 28 per cent, the policy stance remains tight to anchor inflation expectations.
Treasury yields, currently ranging between 15.23 per cent and 16.95 per cent (Tender 1953), remain deeply negative in real terms, creating disincentives for holding government securities.
Fiscal consolidation efforts have further motivated the Ministry of Finance to suppress borrowing costs, resulting in limited upside for treasury yields despite the high policy rate.
In the fixed income market, the low real returns on government securities continue to dampen investor appetite.
As Ghana lacks inflation-indexed bonds, investors are increasingly shifting towards higher-yielding corporate debt, bank securities and short- to medium-term assets that provide better liquidity and potential for reinvestment at higher rates if inflation moderates further.
The equity market presents selective opportunities as macroeconomic stabilisation improves investor sentiment.
Banking stocks continue to perform well, benefiting from improved net interest margins and lower impairments, while other listed sectors such as agriculture, manufacturing, and telecoms stand to gain from easing cost pressures and a stabilising cedi.
Ghana cedi
On the currency front, the cedi has shown strong performance, emerging as the best-performing currency globally in May.
This appreciation is supported by a disciplined fiscal outlook, investor confidence and structural measures, including the newly passed Act establishing GOLDBOD and foreign exchange initiatives by the Bank of Ghana.
These interventions are expected to provide short- to medium-term stability to the currency and ease demand-side pressures on foreign exchange markets.
In the commodities space, price stability in locally produced foods and non-food baskets and agricultural imports may continue as global commodity markets adjust, and local currency strength reduces pass-through effects.
However, external shocks, trade tensions and global supply chain risks still present a level of unpredictability that investors must factor into their outlook.
Given the current macro and market dynamics, investors should consider repositioning toward short to medium-duration fixed income instruments, high-quality corporate bonds and equities with strong fundamentals in sectors benefiting from disinflation and exchange rate stability.
Holding moderate commodity exposure, particularly to gold, may provide a hedge against volatility. Meanwhile, given the cedi’s strengthening trajectory and policy support, dollar hoarding may be reduced in appeal, but maintaining a balanced exposure to foreign currency assets could still serve as insurance against future shocks
Source: Graphic online
Finance Minister Dr. Cassiel Ato Forson has revealed that the much-touted “Gold for Oil” policy under the previous government was not a true barter arrangement as publicly claimed.
Speaking on JoyNews’ PM Express, Dr. Forson dismissed the policy as a facade, stating that the Bank of Ghana (BoG) simply paid suppliers in dollars—contrary to the narrative that Ghana exchanged gold directly for petroleum products.
“It didn’t work properly. The Bank of Ghana was paying in cash—dollars—not gold. There was never any gold-for-oil barter. Never,” he emphasized in a direct response to host Evans Mensah.
The former administration had promoted the policy as a groundbreaking solution to stabilize the cedi by reducing demand for foreign exchange. However, Dr. Forson said the reality was far less innovative.
He explained that a supplier based in the United Arab Emirates provided fuel through the Chamber of Bulk Oil Distributors (CBOD). The CBOD paid in cedis, and the BoG converted that into dollars to complete the transaction. “Pure trade. Nothing like the barter they portrayed,” he said.
Confirming with BoG officials, Dr. Forson noted that although the central bank had been increasing its gold reserves, it had no direct link to the oil purchases.
Member companies of the Ghana Chamber of Mines sold a total of 358,218 ounces of gold to the Bank of Ghana (BoG) in 2024 under the Domestic Gold Purchase Programme, significantly boosting the central bank’s reserves and contributing to the strengthening of the Ghanaian cedi against the US dollar.
Speaking at a press briefing, the Chief Executive Officer of the Chamber, Ing. Dr. Kenneth Ashigbey, emphasized the mining sector’s ongoing commitment to stabilizing the national currency.
“The current strength of the cedi is largely anchored on gold,” he said. “As an industry, we remain committed to this cause. Through our partnership with the Bank of Ghana, we supplied over 358,000 ounces of gold last year under the Domestic Gold Purchase Programme.”
Dr. Ashigbey also highlighted the sector’s participation in the Voluntary Forex and Gold Purchase Initiative, which he noted has further strengthened the Bank of Ghana’s reserve position.
“It’s essential to recognize how these collaborative efforts between the mining sector and the BoG are helping both the national economy and the sustainability of our industry,” he added.
Ghana’s Producer Price Inflation (PPI) has plunged to 5.9% in June 2025—the lowest year-on-year rate recorded since November 2023, according to the Ghana Statistical Service (GSS).
This marks a significant 4.2 percentage point decline from the 10.1% recorded in May and a sharp 19.7-point drop from the 25.6% registered in June 2024. It is also the fifth consecutive month of declining producer inflation, indicating consistent easing across several major production sectors.
On a monthly basis, the PPI saw a deflation of 1.4%, meaning producers, on average, received lower prices for their goods and services in June compared to May.
Releasing the data in Accra on Wednesday, July 16, Government Statistician Dr. Alhassan Iddrisu attributed the decline to ongoing price reductions in key sectors such as mining, manufacturing, transport, and hospitality.
“Our data confirms a steady fall in producer inflation, driven largely by lower input costs in high-weight sectors like mining and manufacturing,” Dr. Iddrisu said.
The Mining and Quarrying sector—which holds the largest weight in the PPI basket at 43.7%—saw inflation fall sharply from 13.7% in May to 6.5% in June. The Manufacturing sector, which accounts for 35% of the index, also dropped from 9.8% to 7.6%.
Other sectors saw even more dramatic shifts. Inflation in the transport sector dropped deeper into negative territory, from -4.8% to -7.0%, while the hotel and restaurant category experienced a notable turnaround—from a 6.5% rise in May to a 2.7% fall in June, a swing of 9.2 percentage points.
The Services sector recorded a modest year-on-year inflation of 0.7%, while construction posted a 6.0% increase.
Within subsectors, mining support services topped the inflation chart at 56.1%, while crude oil and natural gas extraction experienced a steep deflation of -25.1%. In manufacturing, vehicle production led with 35.8% inflation, followed by leather goods at 32.4%. Conversely, petroleum refining saw a 10.6% drop in prices.
Dr. Iddrisu advised businesses to adjust strategically. “Falling input costs can create room for innovation, but companies must be cautious about shrinking profit margins,” he said.
He urged government to focus on sustaining macroeconomic stability, incentivizing production, and supporting key sectors to maintain the downward inflation trend and safeguard employment.
The GSS also encouraged consumers to be discerning in their spending. “Shop smart, question price hikes, and reward brands that reflect cost reductions,” the report advised.
If producer cost trends persist, consumers may soon experience a welcome reduction in retail prices—provided businesses pass on the savings.
The PPI report tracks changes in prices received by producers across key economic sectors, excluding consumer taxes and intermediary costs. The current index is based on data from March 2020 to February 2021.
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