Ghanaian businesses hoping for another interest rate reduction from the Bank of Ghana (BoG) may need to temper their expectations, as an economist has cautioned that further monetary easing remains improbable before year’s end despite inflation’s dramatic plunge into single digits.
The year-on-year inflation rate eased to 9.4% in September 2025, down from 11.5% in August, according to the Ghana Statistical Service (GSS), marking the first single-digit reading in four years. The achievement has sparked fresh optimism within Ghana’s business community that the Monetary Policy Committee (MPC) might deliver another rate cut to further reduce borrowing costs.
But Dr. Paul Appiah Konadu, an economist at Academic City University, is urging caution against such hopes. His analysis suggests the central bank will likely hold rates steady for the remainder of 2025, despite inflation’s impressive decline below the government’s 11.9% year-end target.
“I do not expect that after cutting it by 350 basis points, they would cut it further,” Dr. Konadu explained. “And especially given the recent depreciation of the cedi, you know, that will have inflationary pressures going into the festive season. I expect the Bank of Ghana to maintain the policy rates, maybe till the end of year.”
The MPC slashed the policy rate by 350 basis points to 21.5% from 25% in September, a move that sent positive signals through Ghana’s financial markets. The reduction, which exceeded market expectations, reflected the central bank’s confidence in sustained disinflation and was celebrated by businesses already struggling with high lending costs.
Yet Dr. Konadu’s skepticism rests on three critical factors that could reignite inflationary pressures: the cedi’s ongoing depreciation against major currencies, rising utility tariffs, and the approaching festive season when consumer spending typically surges. These conditions, he argues, create an environment where premature rate cuts could “throw the economy out of gear.”
The economist acknowledged the BoG’s conservative approach earlier in the disinflation cycle. “The Bank of Ghana was a bit conservative in cutting the policy rates from the beginning when inflation started falling,” he observed. “Inflation has already fallen below the end-of-year target. That was 11.9% and we are already doing single digits in September.”
His analysis points to a delicate balancing act facing Ghana’s monetary authorities. While lower interest rates could stimulate business activity and make loans more affordable, they could also weaken the cedi further and fuel spending at precisely the wrong moment, particularly as Ghana heads into the high-expenditure Christmas period.
The policy rate serves as the central bank’s primary tool for managing inflation and influencing borrowing costs throughout the economy. Its current level of 21.5%, though substantially lower than the 25% recorded just months ago, remains among the highest in West Africa and continues to constrain private sector credit growth.
For businesses that have weathered years of elevated borrowing costs, another rate cut represented hope for genuine relief. The September reduction has already begun filtering through to the Ghana Reference Rate, which commercial banks use as a benchmark for lending. However, the full transmission of monetary policy changes to retail lending rates typically takes several months.
Dr. Konadu’s warning underscores the complexity of Ghana’s macroeconomic recovery. The country has made remarkable progress through fiscal discipline and tight monetary policy, bringing inflation down from levels that exceeded 50% in recent years. Protecting that hard-won stability may require patience, even when the temptation exists to provide additional stimulus.
Should the cedi stabilize and festive season spending remain contained, the case for another rate cut in early 2026 could strengthen. But for businesses hoping for relief before Christmas, the message appears clear: don’t count on it.
Source: newsghana.com.gh
