… amid business community clamour for steeper rate cut
By Joshua Worlasi AMLANU and Kingsley Webora TANKEH
The Monetary Policy Committee (MPC) is meeting under improving domestic economic conditions but rising global energy prices that threaten to test the country’s steady disinflation trend, Bank of Ghana Governor, Dr. Johnson Pandit Asiama said at the opening of the central bank’s 129th policy meeting.
Headline inflation slowed to 3.3 percent year-on-year in February, extending the country’s disinflation trend to more than a year and placing the rate below the lower bound of the Bank of Ghana’s medium-term target band, according to data referenced during the opening session.
“Inflation at 3.3 percent is not merely within the target band; it is below the lower bound,” Dr. Asiama told committee members, noting that such figures would have been considered difficult to achieve in recent past.
The decline in inflation has been supported partly by falling transportation costs, which have been in deflation territory for several months and helped moderate consumer price pressures. However, the recent surge in global oil prices threatens to reverse that trend and complicate the policy outlook.
International crude prices have risen sharply amid escalating geopolitical tensions in the Gulf region, particularly the ongoing conflict involving Iran and threats to shipping through the Strait of Hormuz. Brent crude rose to about US$105.15 per barrel on March 16, while West Texas Intermediate traded near US$100.32, levels not seen since 2022.
Oil prices have climbed roughly 41 percent over the past month, rising from around US$70 per barrel and surpassing the US$100 threshold for the first time in four years. The rally has been driven by supply disruptions and production cuts by Middle Eastern OPEC producers, including Saudi Arabia, the United Arab Emirates, Iraq and Kuwait.
Higher energy prices could translate into imported inflation for Ghana by increasing fuel costs, transport fares and logistics expenses across the economy.
“The sustained oil price increases could raise the risk of imported inflation,” Dr. Asiama said, adding that disruptions to energy supply routes and shipping corridors were increasing volatility in global oil markets and introducing uncertainty into the inflation outlook.
Despite these external risks, domestic macroeconomic indicators have strengthened. The Bank of Ghana’s Composite Index of Economic Activity grew 8.4 percent year-on-year at the start of 2026, supported by improving business and consumer confidence and early signs of credit recovery.
External buffers have also improved. Gross international reserves rose to about US$14.5billion, equivalent to 5.8 months of import cover, compared with slightly above US$13billion at the time of the previous MPC meeting.
Fiscal conditions have strengthened as well, with Ghana recording a primary surplus of 2.6 percent of GDP at the end of 2025, reversing a 3.9 percent deficit the previous year.
The central bank must now weigh how these gains interact with rising global risks when calibrating policy.
Market participants had expected further easing in monetary policy after a prolonged disinflation period. Yields on 91-day and 182-day Treasury bills stood at 4.82 percent and 6.3 percent respectively at the beginning of the second week of March, while the Ghana Reference Rate was 11.71 percent and the monetary policy rate currently stands at 15.5 percent.
However, the surge in global energy prices may slow the pace of policy easing if imported inflation pressures intensify.
Authorities could also face fiscal trade-offs. One potential response discussed in policy circles is the suspension of the additional GH¢1 levy on fuel products to soften the pass-through of higher international prices to domestic pump prices.
Beyond the immediate inflation risks, the MPC is also examining the implications of the government’s Ghana Accelerated National Reserve Accumulation Programme (GANRA), which aims to increase international reserves to 15 months of import cover by 2028.
As the committee deliberates ahead of its rate decision, Asiama said policy-makers must weigh domestic progress against external uncertainty.
“The judgment required today is more complex,” he said. “We must make our decision at the intersection of domestic success and external uncertainty.”
Business community urges steeper rate cut
The business community is once again calling for a sharper reduction in the benchmark rate as the MPC deliberates on monetary policy amid mixed conditions – improving domestic conditions and potential external shocks.
Business leaders argue that the current rate does not reflect the recent gains in disinflation and continues to keep borrowing costs high.
They are urging the committee to consider cutting the policy rate by at least 300 basis points, asserting that such a move would lower financing costs, stimulate economic activity and help revive the country’s struggling manufacturing sector.
The MPC commenced its meeting on March 15 to discuss monetary policy and is expected to announce its stance at the close of the three-day meeting on March 18, 2026.
In an exclusive interview with the Business and Financial Times (B&FT), the Chief Executive Officer of the Ghana National Chamber of Commerce and Industry (GNCCI), Mark Badu-Aboagye, said there is a “misalignment” between the policy rate and inflation that must be addressed.
“Inflation is far, far lower than the policy rate. This creates a much larger real interest rate, which should theoretically attract foreign investors, but because it does not reflect the real values, it is not truly drawing investment,” he explained.
He argued that even though the central bank has slashed policy rate significantly in recent months, the further drop in inflation continues to widen the gap between inflation and the benchmark rate.
Therefore, Mr. Badu-Aboagye maintained that narrowing this gap is critical to making Ghanaian goods competitive and stimulate the productive sectors of the economy.
“We expect the policy rate to come further down to be commensurate with the inflation rate we are reporting. It should come at least closer to 10 percent to align with the current level of inflation,” he said.
The central bank has recently pursued a gradual reduction of the policy rate, but business leaders argue that the pace is too slow given the sharp decline in consumer price growth.
While headline inflation has dropped dramatically from 54.1 percent in December 2022 – at the peak of the economic crisis – to 3.3 percent in February 2026, the policy rate has remained relatively sticky, having seen only modest adjustments.
The Bank of Ghana (BoG) begun policy rate easing in July 2025, following significant drop in inflation and relative exchange rate stability. It has since maintained a cautious posture, cutting the benchmark rate cumulatively by 1,250 basis to date – from 28 percent in July 2025 to 15.5 percent in January 2026.
The policy rate adjustments have reverberated positively on the Ghana Reference Rate (GRR) – the benchmark used to determine finance cost. The GRR plummeted from 23.69 percent in July 2025 to 11.71 in March 2026.
According to industry data, average lending rates currently hover between 20 and 22 percent, marking a significant drop from the over 30 percent interest rates at the peak of the economic crisis.
Mr. Badu-Aboagye noted that while this drop is welcome, it is insufficient to restore competitiveness, especially in the manufacturing sector. “Comparatively, around the sub-region, the 20-22 percent that we are seeing is relatively higher than what other countries are doing. It makes our cost of production very high, and our prices are also very high. Businesses are not competitive,” he said.
He said this creates incentives to import rather than produce locally, citing the recent inflation data as evidence.
“Inflation for locally manufactured goods is higher than the general inflation. It means that if you are importing, despite the duties you pay, you can still sell the product at a lower price than what is being produced here. The cost of production is still high, and interest rates are part of the factors contributing to that,” Mr. Badu-Aboagye stated.
He maintained that access to long-term financing is critical to stemming this anomaly. Mr. Badu-Aboagye explained that while discussions with the Ghana Association of Banks (GAB) have been positive, banks are still skewed toward short-term facilities, which are not suited for capital intensive sectors like manufacturing.
“Because businesses are forced to use short-term facilities for long-term projects, they are not able to pay, which is actually why non-performing loans within the bank books are also increasing,” he said.
The post MPC weighs policy path as oil surge tests disinflation gains appeared first on The Business & Financial Times.
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