A senior economist at the University of Ghana Business School, Professor Patrick Asuming has expressed concern over the Bank of Ghana’s latest monetary policy move, describing the central bank’s 300-basis-point rate cut as “surprisingly aggressive” given persistent vulnerabilities in the country’s economic fundamentals.
The Bank of Ghana (BoG) on Monday slashed its benchmark policy rate from 28% to 25% a decision announced at the conclusion of the Monetary Policy Committee’s (MPC) July 2025 meeting. The central bank cited a steady decline in inflation and overall macroeconomic stability as justification for one of the most significant single-step reductions in recent years.
However Prof Asuming has questioned the timing and scale of the move, warning that the easing cycle may have arrived too soon.
“I was surprised by the size of the cut, yes, the indicators are improving inflation is coming down, the cedi is relatively stable but the fundamentals are not yet solid enough to justify such a sharp drop. A more cautious approach would have allowed policymakers to observe whether these gains are sustainable.” Prof. Asuming said in a media interview.
Falling Inflation, Firmer Cedi Fuel BoG’s Decision
The BoG’s bold rate cut comes on the back of recent economic data showing inflation eased sharply to 13.7% in June, down from 18.4% in May, marking the lowest inflation print since December 2021. Additionally, the Ghana cedi has shown resilience, appreciating against major foreign currencies, while external sector buffers have improved, with gross international reserves now covering over 4.8 months of imports.
According to the BoG, these gains, underpinned by tighter fiscal discipline and enhanced external inflows, are enough to support monetary easing to stimulate lending, boost business confidence, and lower the cost of credit.
Yet, analysts remain divided over the decision’s timing and magnitude.
“Not Yet Out of the Woods”
Professor Asuming acknowledged the progress in key indicators but urged caution, noting that underlying vulnerabilities including fiscal fragilities, debt service pressures, and external shocks still pose risks to long-term stability.
“I don’t think there will be a reversal in the disinflation trend in the immediate term. There’s still some momentum. We haven’t seen the full pass-through of the cedi appreciation yet. And with the upcoming harvest season, food inflation is likely to ease further,” he explained.
“However, perhaps we could have waited two more months. If by then we were within the medium-term inflation target band, we’d be on stronger footing to support a policy rate reduction of this magnitude.”
Forward Guidance
The central bank, in its statement, signaled that it would continue to monitor domestic and global developments to determine the future direction of policy. It also reiterated its commitment to anchoring inflation expectations and safeguarding the macroeconomic gains achieved so far.
While the policy rate cut offers relief to businesses and consumers grappling with high borrowing costs, critics argue that structural weaknesses in the economy call for greater prudence, not optimism-driven decisions.
As monetary easing takes effect, all eyes will be on inflation dynamics, exchange rate movements, and fiscal consolidation efforts to determine whether the BoG’s gamble pays off or backfires.
