The Bank of Ghana (BoG) has emerged as one of the most aggressive monetary authorities in the world in 2025, slashing its policy rate by a cumulative 650 basis points (bps) since January.
This move puts the West African nation ahead of many advanced and emerging economies, where central banks are only beginning to pivot toward easing after years of tight monetary policy.
According to Fitch Solutions in its “Mid-Year Update: Banking Key Themes for 2025”, most central banks, including the European Central Bank (ECB), the US Federal Reserve, and the Gulf Cooperation Council (GCC), are expected to cut policy rates by a more modest 50bps by the end of the year.
Meanwhile, Ghana’s aggressive stance highlights its determination to revive lending, support domestic growth, and ease financing costs for businesses and households battered by high inflation in recent years.
Global Monetary Easing Trends
Globally, the shift toward monetary easing reflects cooling inflation and growing fears of weaker economic growth. The ECB and Fed’s anticipated cuts mark a significant departure from their prolonged tightening cycles that began in 2022. However, Fitch cautions that these rate reductions, while supportive of credit demand, could erode banks’ net interest income and squeeze profitability.
For banks in the US and Europe, profitability resilience will depend on whether lower rates truly reinvigorate loan demand and whether non-interest income streams can offset shrinking margins. This delicate balancing act is one that Ghanaian banks are also navigating as the BoG continues to loosen policy.
Ghana’s Policy Gamble
The BoG’s 650bps cut signals both confidence and urgency. While the central bank’s Monetary Policy Committee (MPC) is betting on lower rates to unlock credit growth, critics worry about potential risks if inflationary pressures resurface. Ghana’s inflation trajectory has shown signs of moderation in recent months, but price shocks—especially from food and fuel—remain a persistent threat.
Despite these uncertainties, Ghana’s policymakers appear intent on using monetary tools to provide breathing room for businesses. Lower borrowing costs are expected to boost small and medium-sized enterprises (SMEs), which form the backbone of the economy and have been struggling under the weight of expensive credit.
Meanwhile, global banking systems are grappling with additional shocks from geopolitical uncertainty. President Donald Trump’s April 2025 tariff announcement sent tremors through financial markets, weighing heavily on bank share prices. While banks were not directly targeted by the tariffs, Fitch notes that they remain vulnerable to the secondary effects—slower economic growth, volatile exchange rates, and shifting interest rate expectations.
Large US banks with strong capital positions weathered the turbulence, but lenders with heavy exposure to tariff-sensitive markets, such as HSBC in Mainland China and certain Spanish banks, saw sharper declines. The global environment of policy easing, paired with geopolitical risks, underscores the fragile balance central banks like BoG must strike.
The CRE Challenge in the US and Europe
Beyond tariffs and interest rates, structural weaknesses in commercial real estate (CRE) are intensifying banking risks in advanced economies. Fitch reported that overdue US CRE loans rose to 1.6% in Q1 2025, the highest since 2014, with smaller regional banks most exposed. German banks, too, face mounting challenges, with CRE loans making up 9.9% of total portfolios and non-performing loans reaching 5.9% by the end of 2024.
While monetary easing may offer temporary relief, Fitch warns that demand issues in the office sector—driven by persistent remote work patterns—will remain unresolved unless office attendance increases substantially.
In this turbulent global environment, Ghana’s bold rate cuts stand out as a proactive attempt to insulate the economy from external shocks and domestic sluggishness. By front-loading easing measures, the BoG is betting that faster credit growth and improved liquidity will help spur recovery.
Whether this gamble pays off will depend largely on the ability of Ghanaian banks to manage profitability under lower margins, while simultaneously expanding lending to productive sectors of the economy. Fitch’s outlook suggests that Ghana’s position, while risky, could offer lessons to peers who are still cautiously approaching monetary easing.
As the world braces for synchronized rate cuts, Ghana has already moved ahead of the curve with a decisive 650bps slash to its policy rate. While global peers tread carefully, Accra is betting big on credit-fueled growth. The coming months will reveal whether this bold move cements Ghana as a trailblazer in monetary easing or exposes the economy to fresh inflationary and financial sector risks.
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