The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG), after its last meeting, announced a bold 350-basis-point cut to the Monetary Policy Rate (MPR). This effectively resulted in the reduction of the policy rate from 25% to 21.5%.
The MPC arrived at this decision as a result of the voting pattern of the majority members of the committee. The MPC decision cited by The High Street Journal reveals that not all members of the committee favoured the 350 basis point cut, citing a number of reasons.
Thus, the individual submissions show a clear fault line inside the committee. Four members backed the full 350bps cut, while two argued for a more cautious 300bps reduction. The divergence illuminates how members weighed fast-moving disinflation against exchange-rate and utility-tariff risks.
Here is how each member voted and why;
Member 1 — Voted for 350bps (to 21.5%)
The first member argued that disinflation has broadened. That is, headline inflation had fallen sharply and was down to low double digits. External buffers and tight fiscal policy, the member said, give room to “recalibrate” the stance and relieve pressure on the real sector.
The member therefore voted to support the 350bps cut. However, the member advocated that this cut must be supported by complementary steps, such as adjustments to banks’ Net Open Position (NOP) and the policy corridor, to reinforce the move.
“Given the relatively well-anchored inflation expectations, reflected in the broadening disinflation process, easing demand pressures from the slower expansion of the key monetary aggregates, and continuing tight monetary conditions, I vote to cut the MPR by 350bps to 21.5 percent. In addition, I strongly support other policy measures, including adjustments in the Net Open Position (NOP) of banks and the policy corridor to reinforce the interest rate decision,” the member noted.
Member 2 — Voted for 350bps (to 21.5%)
The second member voted to support the decision to cut the policy rate by 350bps. This decision was driven by improved global and domestic economic conditions, including easing trade tensions, lower inflation, strong GDP growth, resilient banking sector performance, and robust external sector outcomes that boosted reserves and stabilized the cedi.
These positive trends provided scope for monetary easing; however, the vote was moderated by emerging risks such as potential utility tariff hikes and recent foreign exchange market pressures.
The member said, “These positive macroeconomic conditions provide scope for easing the monetary policy stance, and I would have voted for a steeper cut in the policy rate but for some emerging risks, such as the possible increase in utility tariffs and the recent developments in the foreign exchange market. On this note, I vote to lower the MPR by 350 basis points to 21.5 percent.”
Member 3 — Voted for 300bps (to 22%)
This member’s vote was a deviation from the normal votes. The member voted to lower the policy rate by 300 basis points to 22.0 percent. This was based on the faster-than-expected pace of disinflation, with inflation now projected to return to target earlier than anticipated; supportive global conditions, including weaker advanced economies, lower oil prices, and higher cocoa and gold prices; and staff forecasts showing inflation around 9 percent by end-2026.
This outlook suggests that maintaining excessively high real interest rates would hurt the real sector, providing strong justification for easing monetary policy.
The member decided, “With inflation at this level, the real monetary policy rate will be excessively high, and this provides room to ease the monetary policy rate. The current high real interest rate is damaging to the real sector of the economy. On this basis of these arguments, I vote to lower the MPR by 300 percentage points to 22.0 percent.”
Member 4 — Voted for 300bps (to 22.0%)
This member voted to cut the policy rate by 300 basis points to 22.0 percent. This was based on strong economic growth, resilient external and banking sector performance, and sustained disinflation creating a wide real interest rate gap.
However, caution was advised due to emerging exchange rate pressures, a slowdown in reserves, weaker remittance inflows, and potential utility tariff hikes, prompting a moderate rather than steeper cut, alongside proposals to adjust banks’ net open positions and review Payment Service Providers regulations.
“Given that most of the gains recorded in the first half of the year were derived largely from favourable exchange rate performance, the emergence of demand pressures in addition to possible utility tariff hikes requires some caution in the magnitude of the cut in the policy rate. I, therefore, vote for a 300 basis points cut in the MPR to 22.0 percent. In addition, I propose some adjustments in the net open position of banks to promote interbank market activity, as well as a review of Payment Service Providers registration and renewals,” the member opined.
Member 5 — Voted for 350bps (to 21.5%)
The decision to cut the policy rate by 350 basis points to 21.5 percent was anchored on sustained disinflation, easing inflation expectations, strong external buffers, resilient growth, and improving financial sector performance, supported by high real interest rates that create room for monetary easing.
While fiscal consolidation remains on track and systemic risks are subdued, concerns persist over sluggish private sector credit, revenue shortfalls, exchange rate pressures, and potential utility tariff hikes, warranting vigilance despite the favorable macroeconomic outlook.
Member 6 — Voted for 350bps (to 21.5%)
The vote for a 350-basis-point cut in the policy rate to 21.5 percent was driven by strong global and domestic growth, robust external and fiscal performance, and sustained disinflation, with inflation falling sharply to 11.5 percent and expected to decline further.
Although risks from potential utility price hikes, crude oil volatility, and recent cedi pressures remain, adequate reserve buffers, tight fiscal and monetary policies, and sterilisation efforts are expected to contain them.
A bold cut was deemed necessary to prevent excessively high real interest rates, support exchange rate stability, lower lending rates, boost private sector credit, and stimulate output growth.
What the Split Means — Quick Takeaways
Vote tallied with 4 members opting for a 350bps cut, while 2 members voted for a 300bps cut. The majority opted for the more aggressive easing, but the two cautious votes underscore real concerns about FX and utility tariffs.
The rate cut came with complementary operational moves (revision of NOP rules and corridor adjustments) meant to improve interbank liquidity and guide pass-through to borrowing costs.
Markets will watch how quickly banks lower lending rates and whether the cedi holds up as prices and tariffs evolve.
