BoG Holds Policy Rate at 28%

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has voted to maintain the policy rate at 28%, a decision aimed at anchoring inflation expectations and sustaining ongoing macroeconomic stability.

The announcement was made on May 23, 2025, by Dr. Johnson Asiama, Governor of the BoG and Chairman of the MPC, during a press briefing.

In his address, Dr. Asiama noted that the MPC’s decision to hold the rate steady was driven by expectations of a continued decline in inflation.

Ghana’s current inflation rate stands at 21.2%, but recent forecasts suggest that inflationary pressures are likely to ease further, supported by a tight monetary policy stance, exchange rate stability, and ongoing fiscal consolidation efforts.

“Inflation is now expected to decline faster than previously projected. Barring any unanticipated shocks, we foresee inflation reaching the medium-term target in the first quarter of 2026, as opposed to the second quarter initially projected” Dr. Asiama stated.

Despite this encouraging trajectory, the governor emphasized that inflation levels remain elevated relative to the BoG’s medium-term target, necessitating the maintenance of the current policy rate to ensure the disinflation process remains on track.

Influence

Touching on global trends, Dr. Asiama explained that economic developments in the first four months of 2025 have been marked by weak growth, uneven disinflation outcomes, and generally restrictive financial conditions.

These trends have largely been influenced by shifts in global trade policies, particularly the imposition of trade tariffs by the United States and retaliatory measures by trading partners.

“The spillover effects of these trade tensions have heightened policy uncertainty, dampened investor confidence, and reduced global growth prospects,” he noted.

As a result, monetary policy decisions across various countries have diverged, some central banks have kept rates high for longer, while others have started cutting rates in response to softening inflation.

While global conditions remain uncertain, Ghana’s domestic economy is showing signs of steady recovery. High-frequency indicators compiled by the BoG point to a sustained improvement in economic activity.

Notably, the Composite Index of Economic Activity (CIEA) registered a 2.3% year-on-year increase in March 2025, compared to 1.0% in the same period in 2024.

This growth was driven primarily by robust performance in exports, increased credit to the private sector, and heightened construction activity. Furthermore, the Ghana Purchasing Managers’ Index (PMI) climbed above the 50-point threshold, indicating expansion in output and new orders, and reflecting improved business sentiment.

Rebounding

One of the most notable developments shared by Dr. Asiama was the significant rebound in consumer and business confidence.

According to recent BoG surveys, confidence indices have reached their highest levels in seven years, underscoring growing optimism about the country’s macroeconomic direction.

This resurgence in sentiment can be attributed to the visible easing in inflationary pressures, relative stability in the exchange rate, and improved fiscal management under the current economic reform agenda.

In the intervening time, the MPC remains committed to its mandate of ensuring price stability while supporting growth. Dr. Asiama reaffirmed that policy decisions will continue to be guided by data and evolving macroeconomic conditions, both domestic and global.

“The Committee is closely monitoring developments and stands ready to respond appropriately should new risks emerge that could threaten inflation expectations or economic recovery,” he said.

By maintaining the policy rate at 28%, the Bank of Ghana aims to reinforce the current disinflation path and sustain investor confidence, while allowing time for previous policy measures to take full effect.

With inflation expected to approach the BoG’s medium-term target in early 2026, the decision signals cautious optimism anchored in a pragmatic view of Ghana’s economic prospects.