Ghana’s latest monetary policy rate cut could bring welcome relief to businesses and households reeling under high borrowing costs, says economist and political risk analyst Dr. Theo Acheampong.
The Monetary Policy Committee (MPC) of the Bank of Ghana after its 125th Meeting announced a 300 basis points cut in the monetary policy rate, effectively reducing the rate from 28% to 25%.
Reacting to the MPC’s decision, Dr. Acheampong expressed confidence that the decision will not only anchor the disinflation process but also ease the cost of credit for the average Ghanaian.
The economist had earlier predicted that the Bank of Ghana is likely cut the rate by 300 basis points. Interestingly, the Central Bank just announced same on Wednesday as predicted by the economist.
“I indicated on Eugene Bawelle’s post yesterday that I expect the Bank of Ghana to cut the policy rate by 300 basis points at the MPR’s sitting to anchor the disinflation process and also signal market expectations of further cuts down the year. Guess what? The Central Bank just announced same – the policy rate has moved from 28% to 25%. Glad to have called this right. This should translate into lower borrowing costs for businesses and consumers,” he indicated in a social media post cited by The High Street Journal.
The significance of this rate cut goes beyond numbers. For many small and medium-sized enterprises (SMEs) struggling to stay afloat, this could be some respite for them.
This major reduction in the policy rate is likely to translate into a reduction in the average lending rate, effectively reducing the cost of borrowing from financial institutions.
For businesses and households, the development comes as good news since it raises hopes for families weighed down by the high cost of personal loans, mortgages, and overdraft charges.
In recent months, interest rates on commercial loans have ranged from 30% to over 35%, making it difficult for businesses to expand and for consumers to afford big-ticket items like cars, homes, or appliances.
The private sector in Ghana has often bemoaned the high interest rates as one of the most cited barriers to private sector growth. Should the banks follow the BoG’s lead and revise their base rates, businesses are in for a major boost.
Just like Dr. Acheampong, many other economists’ optimism also ties into the broader economic outlook. Lower interest rates typically stimulate spending, investment, and job creation, which are key ingredients for sustained recovery, especially as inflation continues to fall.
However, the impact of the policy rate cut will depend heavily on how quickly and fully commercial banks respond. Analysts say that while monetary easing is a step in the right direction, the speed of transmission to the real economy is often slow due to structural rigidities in the financial sector.
In the coming days, many entrepreneurs, salaried workers, and young professionals will be watching their banks closely, hoping that this policy shift translates into cheaper credit and renewed financial breathing space.
