Ghana’s central bank has cut its benchmark interest rate by half a percentage point, after holding it for nearly a year at 26 percent.

According to the central bank’s governor Dr. Abdul-Nashiru Issahaku reduction in inflation to 15.8 percent is as a result of headline inflation which has gradually trended downwards in the year, and effects of upward adjustments in petroleum, utility and transport prices.

Speaking at a press conference to announce the Monetary Policy Committee press briefing which concludes the 73rd regular MPC meetings and the last for 2016 the Dr. Abdul-Nashiru Issahaku announced that the policy rate has been reduced by 50 basis points from 26 percent to 25.5 percent.

“The Committee concluded that the downside risks to growth outweigh the risks to inflation and therefore decided to reduce the Policy Rate by 50 basis points to 25.5 percent.”

“In summary, the Committee noted that the global economy remains fragile with uncertainties. On the domestic front, inflation trends are easing downwards in line with forecasts, alongside subdued underlying inflation,” he stated.

The governor further stated that “the outlook for inflation is broadly positive as reflected in the continued decline in the underlying inflation, stability in the foreign exchange market, low aggregate demand conditions and general high real interest rates.”

He said the policy tightness and continued stability of the exchange rate largely accounted for the declining trends, as recent decline in inflation was driven mainly by non-food inflation

Meanwhile the governor disclosed that, the Bank's main measure of core inflation (CPI inflation excluding energy and utility prices) which measures underlying inflation, continued on its descent, declining from 16.9 percent in September to 15.2 percent in October.

The reduction in the policy rate comes after several calls from industry players and some economist that inflation should be reduced consider the current inflation trends and high cost of doing business.

Industry call for reduction.

GN Research, a member of Group Nduom, believes the policy rate is likely to go south for the first time in a year by at least 100 basis points due to several reasons, first among which is the fact that inflation has dropped to a more than two year low of 15.8percent in October 2016.

With the cedi gaining 3.8percent and 4.12percent against the British pound and Euro respectively, and with the expected rise in gross foreign assets, the research arm of Group Nduom expects the cedi to remain stable, even as consumers and businesses increase their demand for forex ahead of the elections and the yuletide.

“There is no better time to reduce the monetary policy rate by at least 100 basis points, than now. This is expected to lower lending rates and offer some respite to private businesses who need additional capitalahead of the festive season,” it said.

Finance Minister, Seth Terkper, was also hopeful of a policy rate cut, although he is careful not to spread through the central bank’s turf, saying: “They [MPC] have always taken the fiscal into account and one will assume that anything that improves the fiscal will ultimately impact positively on that decision. However, ultimately, it is a decision for the Central Bank to make.”

Whilst the cedi has been fairly stable all year round, inflation, which rose to a peak of 19.2percent in March, has dropped to 15.8percent in October, and President Mahama is even confident we could end the year at 14percent.


The latest Annual Percentage Rates (APR) and Average Interests (AI) report released by the Bank of Ghana shows that the average minimum interest rates that can be charged on loans and advances by commercial banks in the country increased marginally between May and September this year from 27.5percent to 27.8percent.

Meanwhile the Governor of BOG, Dr. Abdul-Nashiru Issahaku in an earlier interview with the media, bemoaned the country’s high lending rates.

“It is a worry, and that is why we are working around the clock to bring down the rates. We will see the rate coming down if the disinflation process is consolidated and when inflation begins to come down substantially, of course it will pull down interest rate. And that is our mandate to bring down inflation,”