BoG Holds Policy Rate at 14% – Johnson Asiama
The Governor of the Bank of Ghana, Johnson Asiama, has announced that the Monetary Policy Committee (MPC) has maintained the policy rate at 14 percent, citing rising global inflation risks and emerging external pressures despite strong domestic economic recovery.
Addressing the 130th MPC press briefing, Dr Asiama explained that the decision was influenced by renewed inflationary pressures globally, driven by rising crude oil prices and increasing food costs, which are beginning to push headline inflation upward in both advanced and emerging economies.
He warned that the resurgence in global inflation could prompt major central banks to tighten monetary policy, leading to higher global interest rates, tighter financing conditions, and potential capital outflows from developing economies like Ghana.
Despite these external risks, the governor noted that Ghana’s domestic economy showed strong signs of recovery in the first quarter of 2026. The bank’s composite index of economic activity recorded a significant year-on-year growth of 12.6 percent in March 2026, up sharply from 2.3 percent during the same period in 2025.
According to him, the growth was driven by increased private sector credit, stronger consumption, industrial output, and improved international trade activities.
However, he acknowledged emerging concerns, as both consumer and business confidence dipped slightly in April due to uncertainties linked to the ongoing Middle East conflict and its potential impact on the domestic economy.
On inflation, Dr Asiama disclosed that headline inflation rose marginally to 3.4 percent in April 2026 from 3.2 percent in March, marking the first uptick since December 2024. The increase was largely driven by non-food inflation, although core inflation continued to decline, suggesting that underlying price pressures remain subdued.
He added that inflation expectations remain broadly anchored within the bank’s medium-term target band, even as risks begin to tilt upward.
The governor also highlighted improvements in monetary conditions, noting a slowdown in money supply growth and a sharp decline in interest rates across the money market. Treasury bill rates, lending rates, and benchmark rates all trended downward, supporting a rebound in private sector credit growth.
On the fiscal front, provisional data showed improved discipline, with the government recording a slight budget surplus of 0.1 per cent of GDP in the first quarter of 2026, against a projected deficit. The primary balance also exceeded targets, reflecting expenditure control despite revenue shortfalls.
Dr Asiama further pointed to continued strengthening of the banking sector, with total assets growing significantly and the capital adequacy ratio improving to 22.3 percent. Non-performing loans also declined, although he cautioned that credit risks remain elevated and require sustained regulatory vigilance.
Externally, Ghana’s position remained resilient, supported by strong gold and cocoa exports, as well as stable remittance inflows. The current account surplus improved to $3.1 billion in the first quarter, while gross international reserves rose to $14.4 billion, providing about 5.7 months of import cover.
However, the Ghanaian cedi depreciated by 8.4 percent against the US dollar as of mid-May 2026, largely due to demand pressures from the energy sector and dividend payments.
Looking ahead, the MPC acknowledged that geopolitical tensions, particularly in the Middle East, could sustain high crude oil prices above $100 per barrel, posing risks to inflation through fuel, transport, and utility costs.
Despite these uncertainties, the committee assessed the risks to inflation and growth as broadly balanced and opted to hold the policy rate steady at 14 percent.
“The Committee will continue to monitor incoming data and take appropriate policy actions where necessary,” Dr Asiama stated.
In addition, the MPC announced a new measure to standardise the dynamic cash reserve ratio at 20 per cent in domestic currency, effective June 4, 2026, as part of efforts to strengthen monetary policy transmission.
The next MPC meeting is scheduled for July 20–22, 2026, where further policy direction will be determined based on evolving economic conditions.
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