Ghana Set for Largest Interest Rate Cut Since 2001 Amid Rapid Disinflation

The Bank of Ghana is expected to implement its most aggressive monetary policy easing in over two decades following a significant drop in inflation, strengthening the case for a sharp reduction in the benchmark interest rate.

A formal announcement of the policy decision is expected on Friday, according to a statement released late Wednesday. No further comments were issued by the regulator.

Economists surveyed by Bloomberg project a 250 basis-point cut to bring the benchmark policy rate down from 28% to 25.5%, following June’s inflation reading of 13.7% — the lowest since December 2021 and down sharply from 18.4% in May. If realized, the move would mark Ghana’s largest rate cut since 2001.

The central bank last adjusted the rate in March, with a surprise 100 basis-point hike to 28%. It maintained that level in May amid tightening conditions.

However, the recent deceleration in inflation and improving macroeconomic outlook have triggered market expectations of policy easing.

Yields on the Bank of Ghana’s 56-day bills — a key instrument used for liquidity management — plunged by 1,000 basis points to 18% on July 14, shortly after the inflation data was released. The sharp drop reflects growing investor confidence that the central bank is shifting toward an accommodative stance.

Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered Plc, expects a 300 basis-point cut, citing the need to relieve debt service pressure. “A decisive reduction in rates should help ease very onerous debt service costs,” she said.

Leeuwener Esterhuysen, an economist at Oxford Economics, supports a 200 basis-point cut, arguing that policy normalization would better align the lending rate with the current inflation trend and avoid mixed signals.

“Lowering it would help reduce borrowing costs and support the economy, especially as business confidence improves and macro conditions stabilize,” he noted.

The acceleration in easing measures comes at a time when the cedi is performing strongly against the U.S. dollar, ranking as the second-best performing currency globally this year after the Russian ruble, based on Bloomberg data.

The stronger exchange rate has further contributed to easing inflationary pressures.

Real interest rates — the difference between nominal rates and inflation — are now at their highest levels in two decades.

Analysts argue that maintaining such elevated rates in the current environment could undermine the recovery momentum.

“The moving forward of the monetary policy committee meeting and the drop in the yield on the 56-day bills indicate that the Bank of Ghana is bringing forward its monetary easing envisaged for the second half of the year,” said Mark Bohlund, senior credit analyst at REDD Intelligence.

However, Bohlund anticipates a more cautious 100 basis-point cut in the near term to allow for market response assessment, with deeper cuts likely in September or November if current inflation and FX conditions persist.

The policy shift coincides with Ghana’s efforts to strengthen fiscal discipline under the International Monetary Fund-supported program. The IMF recently approved a $367 million disbursement following a successful program review.

The central bank’s decision on Friday will be closely watched by investors and global financial institutions, as it signals a new phase in Ghana’s post-crisis macroeconomic strategy.

The move is expected to influence lending rates, credit growth, and broader economic activity in the second half of the year.