By Toma Imirhe
At the end of last week the Bank of Ghana’s Monetary Policy Committee (MPC) kept to the script expected by most monetary economists, when the central bank’s Governor, Dr Johnson Asiama, announced that the benchmark Monetary Policy Rate(MPR) was being maintained at 28%, for the next two months. This is the rate it had been hiked to at the end of March when the MPC voted for a 100 basis point increase from the erstwhile 27% it had inherited from the previous BoG administration.
Explaining the decision, Dr Asiama noted that “The latest forecast points to continued easing of inflationary pressures on the back of tight monetary policy stance, exchange rate stability, and fiscal consolidation. Inflation is expected to ease faster towards the medium-term target in the first quarter of 2026 as opposed to the second quarter as earlier envisaged, barring unanticipated shocks.
“Despite these positive developments, the Committee observed that the current level of inflation remains high relative to the medium-term target and will require maintaining the tight stance to reinforce the disinflation process. Under the circumstances, the Committee, by a unanimous decision, maintained the policy rate at 28.0%.”
The BoG now expects inflation to end the year at 11.9%, downfrom 21.4% currently, and fall further into its medium term target range of between 6% and 10% by the first quarter of 2026.
While borrowers will be disappointed that the recent strong gains in Ghana’s key performance indicators did not translate into a cut in the benchmark MPR, Dr Asiama correctly pointed out that the restoration of macro-economic stability is already driving down interest rates across board, despite the central bank’s continued tight monetary policy to squeeze out stubbornly high headline inflation.
While average deposit rates have barely changed since the beginning of 2025, the Ghana Reference Rate – which is set by the Ghana Association of Banks and serves as the base lendingrate for the industry – fell from 29.31% at the start of this year, to 23.99% by April. Similarly, the average lending rate charged by banks, fell from 30.25% to 27.40% over the same period. This is despite the 100 basis points increase in the benchmark MPR in late March.
Pending the release of data for May, it is safe to assume that this trend of falling interest rates is continuing. Between January and April, the 91 day treasury bill rate fell much more sharply than lending rates, from 27.73% to 15.47%, while the 182 day bill declined from 28.43% to 16.23% and the 264 day bill fell from 29.95% to 18.62%. Instructively, at the most recent weekly tender of government treasury bills – concluded at the same time the MPC was deciding to retain the MPR at 28% – the 91 treasury bill interest rate reached a new low of 14.93%, with the 182 day bill rate having fallen to 15.55% and the 364 day bill having declined to 16.00%.
Based on interest rate trends over the previous couple of months this suggests that lending rates are likely to have fallen further during May too and look set to continue declining over the coming weeks, despite the MPR having been retained at 28%.
It is instructive that despite the ongoing decline in interest rates, lending rates remain positive in real, inflation adjusted terms, and the negative gap between treasury bill rates and inflation, although inordinate, looks set to dissipate as inflation edges lower towards the central bank’s target for end of 2025 of11.9%.
