Ghana’s monetary policy outlook is tilting decisively toward easing, as a Finance and Tax Analyst projects a significant reduction in the Bank of Ghana’s policy rate ahead of the conclusion of the 128th Monetary Policy Committee meeting.
Nelson Cudjoe Kuagbedzi has forecast a 350 basis point cut that would bring the benchmark rate down from its current 18 per cent to 14.5 per cent, arguing that prevailing macroeconomic conditions justify a bold shift in policy.
According to Mr. Cudjoe Kuagbedzi, the central bank now has ample room to loosen monetary conditions without undermining price stability. He pointed to Ghana’s improving inflation trajectory as a critical factor supporting his outlook. Inflation closed the year at 5.4 per cent, a level that many analysts see as comfortably within the Bank of Ghana’s target range.
“Considering the fact that inflation ended the year at 5.4 per cent, while the policy rate remained at 18 per cent as of November, it is only prudent for the Bank of Ghana to reduce the policy rate by about 350 basis points to 14.5 per cent.”
Mr. Cudjoe Kuagbedzi
In his view, maintaining such a wide gap between inflation and the policy rate risks unnecessarily constraining economic activity at a time when the economy is seeking stronger momentum.
High Policy Rate Seen as Drag on Growth
The policy rate serves as the benchmark at which the central bank lends to commercial banks, influencing lending rates across the financial system. At 18 per cent, the rate remains one of the most restrictive levers in the economy, translating into high borrowing costs for businesses and households.
Mr. Cudjoe Kuagbedzi warned that keeping the cost of capital elevated could stifle private sector expansion, limit investment, and slow job creation. He argued that the benefits of Ghana’s recent macroeconomic stabilization could be eroded if credit conditions remain tight for too long.
“If the cost of capital is too high, businesses cannot borrow to expand their operations and ultimately create the jobs needed for the economy,” he said, adding that easing monetary conditions would support investment and improve employment outcomes.
Job Creation Agenda Under Spotlight
The analyst also linked his projection to the government’s ambitious employment agenda for 2026. Authorities have set a target of creating more than 600,000 jobs, with the private sector expected to play a leading role in delivering that outcome.
According to Mr. Cudjoe Kuagbedzi, this objective cannot be achieved without improved access to affordable credit for businesses, particularly small and medium sized enterprises that form the backbone of employment generation. He noted that while fiscal initiatives can provide support, monetary policy remains a crucial enabler of private sector led growth.
In this context, a reduction in the policy rate to 14.5 per cent would send a strong signal that the central bank is aligned with growth objectives while still safeguarding macroeconomic stability.
Unemployment Concerns Add Pressure
Beyond job creation targets, Ghana’s broader unemployment challenges also feature prominently in the analyst’s assessment. He argued that a further reduction in the policy rate would help stimulate lending across key sectors of the economy, boost productivity, and strengthen the recovery that has followed a period of economic stress.
Lower interest rates, he said, would encourage banks to extend more credit to productive sectors such as manufacturing, agriculture, and services, thereby supporting value creation and income growth. This, in turn, could help ease unemployment pressures and improve livelihoods.
While advocating for a significant rate cut, Mr. Cudjoe Kuagbedzi expressed confidence that the Bank of Ghana could strike the right balance between supporting growth and maintaining price stability. He emphasized that current inflation dynamics provide room for action, especially if easing is carefully calibrated and supported by prudent fiscal management.
He also highlighted the importance of forward looking policy decisions, noting that monetary policy operates with lags. Acting decisively now, he suggested, could position the economy for stronger performance in the months ahead.
Eyes on the MPC Decision
As the 128th Monetary Policy Committee meeting draws to a close, market participants and businesses alike are watching closely for signals from the central bank. Expectations of a rate cut have been building amid improving macroeconomic indicators and growing calls for policies that support investment and employment.
Mr. Cudjoe Kuagbedzi expressed optimism that the central bank would take these factors into account in its upcoming decision, reinforcing expectations of a reduction in the policy rate to support growth while maintaining price stability.
If the projection proves accurate, a move to 14.5 per cent would mark one of the most notable shifts in Ghana’s monetary stance in recent years, potentially reshaping credit conditions and setting the tone for economic activity in 2026.
READ ALSO:GIPC Unlocks Industrial Potential in Western Region
