The government had set an end-year inflation target of 11.9%, but as of August 2025, inflation had already fallen below this level to 11.5%, indicating more easing price pressures in the economy than expected.
With the policy rate cut by 350 basis points to 21.5%, some analysts have expressed concerns that it could potentially fuel higher inflation. They argue that the reduction in interest rates may encourage more borrowing and spending, which could put upward pressure on consumer prices.
However, the Bank of Ghana (BoG), through its Director of Research Dr. Philip Abradu-Otoo, has assured the public that this would not be a worry. Dr. Abradu-Otoo emphasized that the Bank carefully evaluated all economic scenarios before implementing the cut and expects inflation to fall further into the single-digit range. He also pointed out that Ghana’s international reserves remain robust, providing strong support for the local currency and ensuring the country can finance imports.
“In taking this decision, we did factor in all these scenarios, and what we found out is inflation will still be in the single-digit range,” Dr. Abradu-Otoo said on Joynews’ PM Express Business Edition.
He added, “Our international reserves are strong enough to support the local currency and finance imports, while growth is picking up strongly. All this gives us comfort to lower the rate.”
The policy rate cut is expected to ease lending costs for commercial banks, which should, in turn, benefit businesses and households. Dr. Abradu-Otoo recalled that following the previous rate cut in July 2025, commercial banks had already reduced lending rates by around 2.5%, and the BoG expects a similar or greater reduction this time.
While some industry players remain cautious due to the still relatively high non-performing loan (NPL) ratio of 20.8%, the Bank insists that corrective measures are underway. “We don’t think that the NPLs will be that bad or remain that high in the coming months based on some measures that the Bank of Ghana has undertaken,” he said.
Dr. Abradu-Otoo also highlighted that the Bank is working to improve credit to businesses across key sectors of the economy. He stressed that the rate cut is a carefully considered move aimed at stimulating credit, supporting economic growth, and maintaining price stability.
