BoG rate cut to 14% not unanimous – MPC split over global risks, pace of easing

The decision by the Bank of Ghana (BoG) to reduce its benchmark policy rate to 14 percent was not unanimous –  a case of diverging views within the Monetary Policy Committee over the appropriate pace of easing.

Details from the March 2026 MPC meeting show that five of the six members voted to cut the policy rate by 150 basis points, while one member opted to maintain the rate at 15.5 percent, over concerns about emerging external risks.The majority justified the rate cut on the back of a sharp decline in inflation, improving macroeconomic conditions, and strengthened external buffers.

In their assessment, monetary policy remained tight in real terms, providing room for a calibrated reduction to support private sector credit growth and sustain the economic recovery.

The majority view suggests confidence that easing inflationary pressures can be maintained without jeopardising price stability, even as borrowing costs begin to moderate.

However, the lone dissenting member adopted a more cautious stance, warning that rising crude oil prices and geopolitical tensions could quickly reverse the disinflation trend.

The member argued that premature easing risks destabilising inflation expectations and potentially eroding the hard-won gains in macroeconomic stability.Notably, no member voted for a rate hike, signalling broad consensus that inflationary pressures have eased, even as the timing and pace of policy easing remain subjects of debate.

Full reasoning

At the 129th Monetary Policy Committee (MPC) meetings held from 16 to 18 March 2026, the Committee, by a majority decision, reduced the Monetary Policy Rate (MPR) by 150 basis points to 14.0 percent. Below are the submissions by the MPC Members.

MEMBER 1

Macroeconomic conditions continued to strengthen, supported by steady disinflation, improved external buffers, and resilient domestic growth. While the outlook remains broadly positive, emerging risks — specifically, the escalating geopolitical tensions —warrant continued vigilance.

Global growth remains resilient but has moderated across major advanced and emerging economies. Near-term indicators suggest a modest pickup over the forecast horizon. However, escalating geopolitical tensions—particularly the US‑Israel‑Iran conflict—pose significant downside risks, including higher energy prices, disrupted trade routes, and increased financial market volatility.These developments could elevate global inflation and tighten external financing conditions with potential spillovers to the Ghanaian economy. Domestic conditions remain stable, supported by strong external buffers and sustained economic activity. The 2025 current account surplus strengthened to US$9.4 billion, reflecting robust commodity exports and solid remittance inflows. The strong performance of the external sector has continued into 2026.

The trade surplus rose to US$3.7 billion for January–February 2026, driven by favourable gold prices and lower non‑oil imports. Gross International Reserves (GIR) reached US$14.5 billion (5.8 months of import cover) at end- February 2026. This should provide sufficient external buffers against potential spillovers from the ongoing geopolitical tensions in the Middle East.

Domestic economic activity remained strong, with provisional real GDP growth reaching 6.0 percent in 2025, up from 5.8 percent in 2024. Early indications suggest continuing robust growth, evidenced by the Bank’s Composite Index of Economic Activity (CIEA), which grew by 8.4 percent year‑on‑year in January 2026. This performance was supported by increased private sector credit, higher industrial consumption, improved export activity, and a recovery in port and tourism services. Business and consumer confidence similarly improved.

Headline inflation has declined for fourteen consecutive readings, driven by easing food inflation and continued moderation in core inflation. Model‑based projections and survey-based inflation expectations continued to decline. Inflation is expected to remain below the medium-term target band in the near term and return within the band in the coming months, absent any unexpected external shocks.

Key risks to the inflation outlook include:

Upside risks: possible significant ex-pump petroleum price adjustments and other effects from the heightened geopolitical tensions.

Downside risks: continued fiscal consolidation and a persistence of pass‑through of recent cedi appreciation.On growth, the potential supply chain disruptions from the ongoing geopolitical tensions constitute the major downside risk, while the emerging signs of recovery in private sector credit, driven by easing credit conditions, constitute upside risks.

Given the sustained improvement in macroeconomic indicators—strong reserve buffers, relative currency stability, and robust domestic activity—and the favourable inflation outlook, conditions support a recalibration of the monetary policy stance.

To reinforce disinflation, support the recovery, and better align market rates, I vote for a measured 150 basis points reduction in the MPR to 14.0 percent. Continued vigilance remains essential to safeguard macroeconomic stability.

MEMBER 2

At the start of the year, global economic activity reflected continued resilience, global inflation was on a descent, and global financing conditions were broadly accommodative. However, recent geopolitical developments have heightened uncertainty and resulted in global supply disruptions, especially in the crude oil market, which has raised global inflation concerns. Faced with these uncertainties, central banks are set to reconsider the hitherto accommodative monetary policy stance if inflationary pressures pick up based on the spike in crude oil prices. These trends may, in turn, result in tightening of global financing conditions with potential adverse spillovers on emerging markets and developing economies, including Ghana. In the domestic economic activity has continued to improve, but the output gap remains negative. Real GDP growth was 6.0 percent in 2025, compared with 5.8 percent in 2024. In January 2026, the CIEA grew by 8.4 percent, compared with 6.4 percent in the same month of 2025. The confidence surveys also reflected positive sentiments by both consumers and businesses, backed by favourable macroeconomic conditions and improved industry prospects. Read more…

Source: Citinewsrooms